PIGEON CORPORATION FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥80.53B
• Operating Income: ¥10.03B
• Net Income: ¥5.55B
• EPS: ¥58.82

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment 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

Verdict: Solid Q3 FY2025 with clear operating leverage and margin expansion, translating into double-digit profit growth despite some FX-related comprehensive income drag. Revenue rose 5.9% YoY to 805.26, supported by improved profitability as operating income increased 18.2% to 100.28 and net income climbed 29.7% to 70.35. Operating margin improved to approximately 12.5%, and net margin reached 8.7%, reflecting disciplined SG&A and better mix/pricing. Based on back-solved comps, operating margin expanded by about 130 bps YoY (from ~11.2% to ~12.5%) and net margin by roughly 160 bps (from ~7.1% to ~8.7%). Gross profit margin stands at 46.6%, underscoring healthy unit economics in core categories. Ordinary income rose 20.8% to 106.70, indicating robust underlying earnings before extraordinary items. However, profit before tax (84.32) is below ordinary income, implying extraordinary losses or valuation adjustments in the quarter. Total comprehensive income (53.56) lagged net income due to negative other comprehensive items, likely FX translation given the company’s overseas footprint. Balance sheet strength is a standout: current ratio 374.8%, quick ratio 309.3%, and cash and deposits of 341.56 exceed current liabilities of 193.04. Leverage is modest with total liabilities of 250.76 against equity of 800.82, and interest coverage is very strong at 179x. ROE is 8.8% via DuPont (8.7% margin × 0.766 turnover × 1.31x leverage), driven primarily by margin expansion rather than leverage. ROIC is reported at a strong 14.4%, comfortably above typical consumer staples hurdle rates. Earnings quality cannot be confirmed as operating cash flow is unreported; this is the key limitation to the quarter’s assessment. The calculated payout ratio of 131.4% suggests over-100% distribution versus earnings, but DPS/FCF data are unavailable; treat this with caution until cash flows are disclosed. Forward-looking, continued mix improvement and SG&A discipline should sustain margin gains, but FX and any extraordinary items remain watch points. Overall, the quarter indicates improving profitability on a conservative balance sheet, with cash flow disclosure the main missing piece for full conviction.

Profitability Analysis

ROE decomposition: ROE = Net Profit Margin × Asset Turnover × Financial Leverage = 8.7% × 0.766 × 1.31 ≈ 8.8%. The largest positive driver versus last year is the margin component: net income grew 29.7% on 5.9% revenue growth, implying significant operating leverage and mix/pricing effects. Operating margin improved by an estimated ~130 bps YoY (from ~11.2% to ~12.5%), and net margin by ~160 bps (from ~7.1% to ~8.7%). Asset turnover at 0.766 is consistent with a branded consumer products model and likely stable YoY; leverage remains low at 1.31x and was not the driver of ROE improvement. Business reasons: gross margin at 46.6% and contained SG&A (290.69) underpin operating profit growth; non-operating net income also contributed modestly (income 6.44 vs expenses 2.92). Sustainability: pricing/mix and SG&A efficiency are generally sustainable if demand holds; however, the gap between ordinary income and PBT suggests extraordinary items could add volatility. Watch for SG&A growth outpacing revenue in future quarters; this quarter’s OI growth (+18.2%) exceeded sales growth (+5.9%), indicating favorable operating leverage rather than cost creep. Interest burden is negligible (interest expense 0.56) with coverage of 179x, supporting profitability resilience.

Growth Assessment

Top-line growth of 5.9% YoY (805.26) appears organic and supported by improved profitability, as evidenced by 18.2% growth in operating income. The quality of growth leans toward margin-led rather than volume-only, with operating margin up ~130 bps. Ordinary income rose 20.8%, confirming core earnings momentum prior to extraordinary items, while PBT was lower due to non-recurring charges. Comprehensive income was weaker than net income (53.56 vs 70.35), indicating FX/OCI headwinds that may persist if currency volatility remains. With non-operating income modest (6.44), the earnings profile is primarily operating-driven this quarter. Near-term outlook: continued execution on price/mix and cost discipline can sustain mid-teens OP growth if sales growth holds mid-single digits. Risks to growth include FX translation, potential category demand softening, and any normalization of SG&A after cost phasing. Absence of segment detail and regional mix limits assessment of growth durability across geographies.

Financial Health

Liquidity is very strong: current ratio 374.8% and quick ratio 309.3%, with cash and deposits (341.56) exceeding current liabilities (193.04). No warning on liquidity thresholds (Current Ratio well > 1.0). Solvency is conservative: total liabilities 250.76 vs equity 800.82; the reported D/E of 0.31x is comfortably below common risk thresholds. Interest coverage is robust at 179x, and effective tax rate stands at 34.2%. Maturity mismatch risk is low given the large cash position, sizable receivables (186.90), and inventories (126.38) vs payables (59.80) and current liabilities (193.04). Off-balance sheet obligations are not disclosed in the provided data; none can be assessed. Overall capital structure provides ample flexibility for investment and shareholder returns.

Cash Flow Quality

Operating cash flow is unreported, so OCF/Net Income cannot be assessed; this is the principal limitation to judging earnings quality. Free cash flow and capex are also unreported, preventing analysis of coverage for dividends and growth investments. Working capital balances are visible (receivables 186.90, inventories 126.38, payables 59.80), but without cash flow statements we cannot determine whether earnings were supported by cash conversion or by working capital expansion/contraction. No signs of manipulation can be inferred or ruled out from the limited data. Given strong net cash and low interest burden, short-term liquidity is not a concern; however, sustainability of higher payout levels should be validated against future OCF disclosures.

Dividend Sustainability

The calculated payout ratio is 131.4%, indicating distributions above current period earnings on this measure; however, DPS, total dividend paid, and FCF are unreported, so this figure should be treated cautiously. Without OCF/FCF, coverage cannot be confirmed. Retained earnings of 561.82 and a cash balance of 341.56 provide balance sheet capacity to support dividends near term, but long-term sustainability hinges on cash generation matching earnings and capex needs. Policy outlook cannot be inferred from the data; monitor guidance and payout targets in upcoming disclosures.

Risk Assessment

Business Risks:

• Category demand softness risk in baby/childcare products amid demographic headwinds
• FX translation and transaction risks impacting revenue, margins, and OCI
• Input cost inflation (resins, packaging, logistics) pressuring gross margins
• Channel inventory adjustments and retailer bargaining power affecting sell-in
• Product safety/quality and brand reputation risk in infant care categories

Financial Risks:

• Potential volatility from extraordinary items (PBT < ordinary income this quarter)
• Dividend coverage uncertainty given unreported OCF/FCF and a calculated payout >100%
• OCI volatility reducing comprehensive income and potentially equity via AOCI
• Working capital swings potentially impacting cash conversion (data not disclosed)

Key Concerns:

• Inability to verify cash flow support for earnings (OCF unreported)
• Negative gap between ordinary income (106.70) and PBT (84.32) suggests one-off losses
• Comprehensive income (53.56) materially below net income (70.35), likely FX-related
• Reliance on margin expansion for profit growth; risk if input costs or pricing normalize

Investment Implications

Key Takeaways:

• Margin-led earnings beat: OI +18.2% on sales +5.9% with ~130 bps OPM expansion
• Net margin improved ~160 bps to 8.7%, driving ROE to 8.8% on low leverage
• Balance sheet exceptionally strong (current ratio ~3.7x; cash > current liabilities)
• Ordinary income strength offset by extraordinary losses impacting PBT
• Comprehensive income weakness flags ongoing FX/OCI headwinds
• Dividend affordability unclear with calculated payout at 131.4% and FCF unreported

Metrics to Watch:

• Operating cash flow and FCF (cash conversion vs net income)
• Gross margin trajectory vs input costs (resin, packaging, freight)
• SG&A growth vs revenue growth to gauge operating leverage persistence
• Inventory and receivables turns (working capital discipline)
• FX impact on OCI and translation exposure by region
• Extraordinary gains/losses bridging ordinary income to PBT

Relative Positioning: Within Japan-listed consumer staples/infant care peers, the company exhibits above-average margin progression and very conservative leverage, positioning it well defensively; the main differentiator versus peers is exceptional liquidity, while the key relative gap is lack of cash flow disclosure this quarter that tempers visibility on dividend sustainability.

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