JAPAN Creative Platform Group Co.,Ltd. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥62.27B
• Operating Income: ¥1.49B
• Net Income: ¥1.83B
• EPS: ¥31.63

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Nihon Sodhatsu Group (7814) delivered FY2025 Q3 consolidated results under JGAAP showing solid top-line growth but pronounced margin compression and elevated balance sheet leverage. Revenue rose 8.9% year over year to ¥62.27bn, indicating resilient demand and/or price/mix improvements across its marketing and printing-related businesses. Despite this, operating income fell 45.5% YoY to ¥1.49bn, highlighting adverse operating leverage as costs and SG&A outpaced sales growth. Ordinary income of ¥1.58bn exceeded operating income, implying a net non-operating gain that partially offset weaker operations despite ¥169m in interest expense. Net income declined 22.4% YoY to ¥1.48bn, with EPS reported at ¥31.63, suggesting a materially lower earnings conversion than the pace of revenue growth. Gross profit margin is 26.8%, while the operating margin compressed to roughly 2.4%, underscoring cost inflation and/or mix pressure. The DuPont framework indicates ROE of 8.44%, driven by a modest net profit margin of 2.38%, relatively slow asset turnover of 0.765x, and high financial leverage of 4.64x (Assets/Equity). The balance sheet shows total assets of ¥81.40bn and total equity of ¥17.55bn; this implies an equity ratio of about 21.6% (the reported 0.0% equity ratio appears to be a data placeholder rather than the economic value). Liquidity is tight with a current ratio of 78.6% and quick ratio of 73.2%, reflecting negative working capital of ¥9.51bn and reliance on short-term liabilities. Interest coverage remains adequate at 8.8x (operating income/interest expense), but cushions could narrow if operating profit softness persists. The effective tax rate, inferred from disclosed income tax and net income, is approximately 39%, which is consistent with domestic norms and contradicts the placeholder metric showing 0.0%. Cash flow statements, depreciation and amortization, and cash balances are not disclosed in the dataset, limiting assessment of earnings quality and capital intensity. The absence of reported DPS suggests no dividend for the period and a payout ratio of 0%, but dividend policy commentary cannot be concluded from the data provided. Overall, the quarter reflects healthy sales momentum but sharply lower operating profitability, leaving ROE sustained mainly by leverage rather than margin strength. Key near-term focus points are cost pass-through, SG&A discipline, and working capital management to prevent further strain on leverage and liquidity.

Profitability Analysis

ROE of 8.44% is decomposed into a 2.38% net margin, 0.765x asset turnover, and 4.64x financial leverage, indicating that equity returns are being supported more by leverage than by operating efficiency. Gross margin is 26.8%, but operating margin is roughly 2.4% (¥1.489bn/¥62.269bn), evidencing significant SG&A intensity and/or cost inflation. The YoY divergence—revenue up 8.9% while operating income fell 45.5%—signals negative operating leverage, likely due to higher input costs, labor, logistics, or unfavorable mix that were not fully offset by pricing. Ordinary income (¥1.582bn) exceeds operating income, implying net non-operating gains of about ¥93m after absorbing ¥169m of interest expense; this cushions earnings but is not a substitute for core margin recovery. Interest coverage is 8.8x, still comfortable but exposed to downside if operating income remains depressed. The implied effective tax rate is about 38.8%, which is within typical domestic ranges. Overall profitability quality is moderate, with leverage compensating for thin margins and slowing operating profit.

Growth Assessment

Top-line growth of +8.9% YoY to ¥62.27bn appears healthy and suggests steady demand in the company’s marketing/printing-related segments. However, profit growth is negative, with operating income down 45.5% and net income down 22.4%, indicating that incremental revenue is currently dilutive to operating margin. The spread between gross margin and operating margin implies SG&A and other operating costs rose faster than sales, potentially from wage inflation, energy/logistics, investment in capabilities, or less favorable product mix. Ordinary income benefitted from non-operating items, but dependence on these reduces the durability of profit growth. Without disclosed depreciation and cash flows, it is difficult to assess whether capex or growth investments are front-loaded and temporarily depressing margins. Outlook hinges on cost pass-through effectiveness, mix optimization, and potential recovery of operating leverage; if pricing actions lag cost inflation, margins could remain pressured despite revenue resilience. Sustainable profit growth will likely require tighter cost control and improved mix, not just volume growth.

Financial Health

Total assets are ¥81.40bn, liabilities ¥59.11bn, and equity ¥17.55bn, implying an equity ratio near 21.6% (the reported 0.0% is not reflective of the balance sheet figures). Leverage is elevated with debt-to-equity of 3.37x, which amplifies returns but raises solvency sensitivity to earnings volatility. Liquidity is tight: current ratio 78.6% and quick ratio 73.2% indicate reliance on short-term funding and effective working capital management to meet obligations. Working capital is negative at ¥9.51bn, a common feature in some print/marketing models but still a risk if receivable collections slow or payables tighten. Interest coverage of 8.8x is acceptable, but reduced operating profit would erode this buffer. Inventories are modest at ¥2.38bn relative to current assets, suggesting limited inventory risk; however, the concentration risk may reside in receivables and contract assets (not disclosed). Overall solvency appears stable for now, but the combination of thin margins and high leverage warrants close monitoring.

Cash Flow Quality

Operating cash flow, investing cash flow, financing cash flow, cash and equivalents, and depreciation are not disclosed in the provided data, so direct assessment of earnings-to-cash conversion and free cash flow is not possible here. The OCF/Net Income ratio and EBITDA metrics shown as 0.00 are placeholders rather than economic values. Given the margin pressure and negative working capital position, there is potential volatility in cash conversion if receivables expand with sales while payables timing changes. Without D&A, we cannot distinguish how much of the earnings decline reflects underlying operating stress versus elevated non-cash charges, although the gap between operating and ordinary income suggests some non-operating support rather than depreciation effects. Free cash flow cannot be estimated reliably absent OCF and capex data. Overall, earnings quality cannot be conclusively judged, but the pattern of higher revenue and sharply lower operating profit raises caution on cash conversion until cost pass-through improves.

Dividend Sustainability

Reported DPS is 0 with a payout ratio of 0%, indicating no dividend for the period based on available data. Because operating cash flow and free cash flow are not disclosed, FCF coverage of dividends cannot be assessed. With elevated leverage (D/E 3.37x), tight liquidity (current ratio 78.6%), and declining operating profit, the balance sheet currently favors reinvestment and de-leveraging over distributions, absent evidence of stronger cash generation. Future dividend capacity will depend on restoring operating margins, stabilizing working capital, and maintaining interest coverage. Policy outlook is unclear from the disclosed items; investors should look for management commentary on payout policy, target payout ratio, and conditions for reinstatement or increase.

Risk Assessment

Business Risks:

• Cost inflation (labor, paper, energy, logistics) outpacing pricing power, compressing margins
• Unfavorable sales mix diluting gross-to-operating margin conversion
• Client budget cyclicality in marketing/printing reducing volume visibility
• Competition and commoditization pressure on pricing
• Execution risk in cost control and productivity programs needed to restore operating leverage

Financial Risks:

• High leverage (D/E 3.37x) and low equity ratio (~21.6%) increase sensitivity to profit downturns
• Tight liquidity (current ratio 78.6%, quick ratio 73.2%) and negative working capital (¥-9.51bn) heighten refinancing and working capital management risk
• Interest rate risk impacting financing costs and coverage (8.8x) if operating income weakens
• Potential cash conversion volatility due to receivable/payable timing and limited disclosed cash balances

Key Concerns:

• Operating income down 45.5% YoY despite +8.9% revenue growth indicates adverse operating leverage
• Thin operating margin (~2.4%) leaves limited buffer against further cost increases
• Dependence on leverage to support ROE (8.44%) rather than operational efficiency
• Incomplete disclosure of cash flow and depreciation data limits assessment of earnings sustainability

Investment Implications

Key Takeaways:

• Top-line growth is solid, but profitability is under pressure with operating margin around 2.4%
• ROE of 8.44% is supported by high leverage (4.64x assets/equity) rather than strong margins or asset turnover
• Liquidity is tight and working capital negative, requiring disciplined cash management
• Interest coverage is acceptable at 8.8x but could deteriorate if operating profit softness persists
• Non-operating gains partly offset weak operations, which is not a durable driver of earnings

Metrics to Watch:

• Operating margin and SG&A ratio trajectory
• Gross-to-operating margin bridge (cost pass-through effectiveness)
• Working capital days (DSO/DPO/DIO) and cash conversion cycle
• Interest coverage and net debt/EBITDA (once EBITDA is disclosed)
• Equity ratio and D/E trends indicating de-leveraging progress
• OCF and FCF once disclosed to validate earnings quality

Relative Positioning: Relative to domestic printing/marketing peers, profitability appears below average on operating margin, asset turnover is moderate, and leverage is higher; headline ROE is roughly in line due to leverage rather than operational outperformance.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis