ORVIS CORPORATION FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥12.64B
• Operating Income: ¥658M
• Net Income: ¥426M
• EPS: ¥238.24

Income Statement

Balance Sheet

Cash Flow Statement

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

ORBIS (78270) delivered solid topline and operating performance in FY2025 Q4 on a consolidated JGAAP basis, with revenue up 10.4% YoY to 126.39 and operating income up 13.6% YoY to 6.58. Gross profit rose to 23.28, translating to a gross margin of 18.4%, and the operating margin improved to approximately 5.2%, indicating positive operating leverage. Ordinary income was 6.43 (+11.3% YoY), with a minor non-operating loss netted from non-operating income of 0.18 and expenses of 0.34. Net income declined 3.0% YoY to 4.21, largely reflecting a normalized effective tax rate of 33.6% and slightly higher non-operating expenses, despite the stronger operating result. Cash flow generation was healthy: operating CF of 6.78 and investing CF of -0.72 produced free cash flow of 6.06, implying an OCF/Net income ratio of 1.61x and robust earnings quality. The balance sheet is sound, with total assets of 125.87 and total equity of 57.13, yielding financial leverage of 2.20x and a calculated ROE of 7.4%. Liquidity metrics are strong—current ratio 230.7% and quick ratio 225.0%—supported by cash and deposits of 11.30 and modest inventories of 1.71. Debt is concentrated in long-term loans (35.30), with total liabilities of 68.74 implying a debt-to-equity ratio of 1.20x; interest coverage is ample at 21.23x. EBITDA came in at 12.74 with a 10.1% margin, reinforcing the improvement in core profitability. Working capital remains a net positive at 39.19, reducing near-term solvency risk. The dividend payout ratio (calculated) is 28.3% with FCF coverage of approximately 5.1x, indicating capacity to sustain distributions, though DPS and total dividend data are unreported. Reported ratios such as operating margin (0.1%) and DOE (0.0%) appear not reflective of the calculated fundamentals, so emphasis is placed on calculated metrics. The DuPont breakdown (net margin 3.3%, asset turnover 1.004x, leverage 2.20x) coherently explains the 7.4% ROE, with scope to enhance ROE via margin lift or asset efficiency. Overall, the company shows improving operating performance, strong liquidity, manageable leverage, and solid cash conversion, though net profit moderation signals sensitivity to non-operating items and taxes. Data limitations exist in SG&A breakdown, R&D, DPS, and some non-operating line items, but available figures provide a sufficient basis for a balanced assessment.

Profitability Analysis

• ROE (DuPont): Net margin 3.3% × Asset turnover 1.004 × Financial leverage 2.20x = ~7.4% (matches reported ROE), indicating moderate returns driven primarily by leverage and steady asset utilization rather than high margins.
• Margins: Gross margin 18.4%; operating margin ~5.2% (6.58/126.39); ordinary margin ~5.1% (6.43/126.39); net margin 3.3%. The step-down from operating to net reflects modest non-operating losses and a 33.6% tax rate.
• Margin quality: EBITDA margin 10.1% vs operating margin ~5.2% implies D&A burden of ~4.9% of sales (6.16/126.39). Low non-operating income (0.18) and limited interest expense (0.31) suggest earnings are predominantly operational.
• Operating leverage: Operating income growth (+13.6% YoY) outpaced revenue growth (+10.4% YoY), evidencing positive operating leverage and some SG&A cost discipline (SG&A 16.69 vs gross profit 23.28).
• Cost structure: COGS of 103.11 implies stable input management; with D&A 6.16, the fixed cost component is material but well-covered by EBITDA (12.74). Further gross margin expansion would notably lift ROE.
• Interest coverage: EBIT/interest = ~21.2x, indicating ample cushion and minimal earnings sensitivity to current finance costs.

Growth Assessment

• Revenue growth: +10.4% YoY to 126.39, indicating solid demand expansion.
• Profit growth: Operating income +13.6% YoY to 6.58; ordinary income +11.3% YoY to 6.43; net income -3.0% YoY to 4.21 due to higher non-operating burden and a 33.6% effective tax rate.
• Sustainability: Growth appears operations-led (EBITDA 12.74; limited reliance on one-offs). Asset turnover of ~1.0x suggests capacity utilization is steady; incremental growth may require either mix/pricing improvements or selective capex.
• Profit quality: OCF/Net income of 1.61x and positive FCF (6.06) confirm cash-backed earnings. Limited non-operating income reduces volatility risk.
• Outlook (near term): Continued operating leverage is plausible if revenue momentum persists and gross margin holds or improves. Net income recovery hinges on maintaining non-operating expenses at low levels and a stable effective tax rate.

Financial Health

• Liquidity: Current assets 69.17 vs current liabilities 29.98; current ratio 230.7% and quick ratio 225.0%, supported by cash/deposits 11.30 and accounts receivable 9.42; inventories low at 1.71.
• Solvency: Total liabilities 68.74; debt-to-equity 1.20x. Long-term loans 35.30 dominate liability structure, reducing near-term refinancing risk. Net debt approximates 24.0 (assuming cash 11.30), which is moderate relative to EBITDA (Net debt/EBITDA ~1.9x).
• Capital structure: Financial leverage 2.20x (assets/equity). Equity base 57.13 and BVPS ~3,220 JPY provide a reasonable capital buffer.
• Interest burden: Interest expense 0.31 with EBIT coverage ~21x mitigates interest rate risk in the short term.

Cash Flow Quality

• Earnings quality: OCF 6.78 vs Net income 4.21 yields OCF/NI of 1.61x, indicating strong cash conversion and limited accrual risk.
• Free cash flow: FCF 6.06 (OCF 6.78 + Investing CF -0.72). Capex was -0.91, implying some asset sales or smaller investment outflows within investing CF.
• Working capital: Working capital 39.19 supports operations; quick ratio 225% suggests low reliance on inventory. Positive OCF despite revenue growth indicates effective receivables and payables management. Specific AR/AP/inventory turnover metrics are not disclosed.

Dividend Sustainability

• Payout ratio: Calculated payout ratio 28.3% suggests a conservative distribution policy; DPS and total dividend amounts are unreported.
• FCF coverage: FCF coverage ~5.09x implies strong capacity to fund dividends from organic cash generation even with modest capex.
• Balance sheet support: Low net leverage (~1.9x EBITDA) and strong liquidity underpin sustainability. Absent explicit policy disclosure (DOE reported 0.0% is not informative), a stable-to-gradual dividend trajectory appears supported by cash flows and earnings profile.

Risk Assessment

Business Risks:

• Potential margin pressure from input cost inflation or pricing competition, given an 18.4% gross margin and ~5.2% operating margin.
• Dependence on steady demand growth to realize operating leverage; a slowdown would compress margins.
• Limited disclosure on segment mix and SG&A components (e.g., salaries, rent), constraining visibility on fixed vs variable cost dynamics.
• Tax rate volatility around the current 33.6% could swing net income despite stable operating profit.
• Customer concentration or order timing risks (not disclosed) could increase revenue volatility.

Financial Risks:

• Moderate leverage (debt-to-equity 1.20x) with long-term loans of 35.30; refinancing or interest rate increases could raise finance costs over time.
• Asset utilization around 1.0x implies ROE is sensitive to margin changes; adverse mix or pricing could weaken returns.
• Non-operating expenses exceeding non-operating income (0.34 vs 0.18) reduce earnings buffer.
• Exposure to working capital swings in receivables could affect OCF, despite current strength.

Key Concerns:

• Net income decline (-3.0% YoY) despite higher operating profit, driven by non-operating items and taxes.
• Sustaining gross margin at 18.4% amid cost environment uncertainty.
• Visibility gaps due to unreported DPS, dividend totals, and detailed SG&A breakdown.

Investment Implications

Key Takeaways:

• Topline and operating profit growth (+10.4% and +13.6% YoY) demonstrate positive operating leverage.
• Margins are stable-to-improving, with EBITDA margin at 10.1% and operating margin ~5.2%.
• Cash generation is solid (OCF/NI 1.61x; FCF 6.06), supporting reinvestment and distributions.
• Balance sheet exhibits strong liquidity (current ratio 231%, quick ratio 225%) and moderate leverage (D/E 1.20x).
• ROE of 7.4% is primarily driven by leverage and asset turnover; incremental margin gains would disproportionately lift ROE.
• Dividend capacity appears well-covered (payout 28.3%, FCF coverage ~5.1x), though DPS is unreported.

Metrics to Watch:

• Gross margin trajectory and input cost pass-through.
• SG&A efficiency (as a % of sales) and any disclosed breakdowns going forward.
• Order trends and revenue visibility indicators (backlog, bookings) if disclosed.
• Effective tax rate normalization and its impact on net income.
• Net debt/EBITDA and interest coverage amid rate environment changes.
• Working capital turns (AR/AP/inventory) as growth continues.

Relative Positioning: Within small-cap TSE peers, ORBIS shows above-average liquidity, moderate leverage, mid-single-digit operating margins, and a cash-generative profile; ROE at 7.4% is respectable but with room for improvement via margin expansion and efficiency gains.

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