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

Pigeon Co., Ltd. (consolidated, JGAAP) delivered solid FY2025 Q3 year‑to‑date performance with revenue of ¥80.5bn (+5.9% YoY) and operating income of ¥10.0bn (+18.2% YoY), indicating healthy operating leverage and disciplined cost control. Gross profit of ¥37.6bn implies a robust gross margin of 46.6%, supporting a higher operating margin of approximately 12.5%. Ordinary income reached ¥10.7bn, exceeding operating income by roughly ¥0.64bn, suggesting positive non-operating contributions beyond the small interest expense (¥56m). Net income rose 29.7% YoY to ¥7.04bn, translating to a net margin of 8.74% and EPS of ¥58.82. Balance sheet strength is notable: total assets ¥105.2bn against total liabilities ¥23.7bn and equity ¥80.1bn, implying low leverage (liabilities/equity ~0.30x) and a high implied equity ratio near 76%. Liquidity is ample with current assets of ¥73.5bn versus current liabilities of ¥17.4bn, yielding a current ratio of 4.23x and quick ratio of 3.63x. DuPont decomposition shows ROE of 8.78%, driven by a net margin of 8.74%, asset turnover of 0.77x, and modest financial leverage of 1.31x. Interest coverage is very strong at ~179x, reflecting negligible financial risk from debt service. On tax, using reported income tax expense (¥2.89bn) and net income, the implied effective tax rate is about 29%, consistent with typical statutory levels, despite the auto-calculated 0% in the dataset. Working capital is sizable at ¥56.1bn, providing operational flexibility and resilience to supply chain volatility. Cash flow statements are not disclosed in this dataset (zeros indicate unreported), so operating cash flow and free cash flow assessment cannot be validated directly. Dividend data are also not disclosed here (DPS shown as zero = unreported), limiting payout analysis; historically, the company has emphasized stable returns, but we base this review only on the presented figures. Overall, the quarter reflects margin expansion, strong balance sheet quality, and improved profitability, albeit with cash flow and dividend details unavailable in this extract. Key areas to watch include sustainability of gross margin gains, SG&A discipline, inventory turns, and any FX or non-operating items underpinning ordinary income. Given the conservative capital structure and high liquidity, solvency risk is low, while execution and demand normalization remain the main variables for the outlook. Data limitations around cash flow and dividends temper confidence in cash conversion and payout sustainability assessments.

Profitability Analysis

ROE (DuPont): 8.74% net margin × 0.766x asset turnover × 1.31x leverage ≈ 8.78% ROE, indicating returns are primarily earnings‑driven rather than leverage‑driven. Operating margin is approximately 12.5% (¥10.03bn OI / ¥80.53bn sales), reflecting favorable mix and SG&A control (implied SG&A ~¥27.52bn, ~34.2% of sales). Ordinary income margin is ~13.25%, suggesting net positive non-operating contributions beyond a small ¥56m interest expense. Gross margin at 46.6% remains a strong underpin for profitability; sustaining this level is key for ongoing margin expansion. Operating leverage is evident: operating income grew 18.2% YoY versus 5.9% sales growth, implying solid incremental margins. Interest coverage is ~179x (OI/interest expense), confirming minimal financing drag on profitability. ROA is approximately 6.7% (¥7.04bn/¥105.16bn), consistent with consumer goods businesses with strong brands and asset-light characteristics. The implied effective tax rate is ~29% (¥2.886bn/¥9.921bn pretax), which aligns with norms and suggests no unusual tax items in the period based on available figures.

Growth Assessment

Top-line growth of 5.9% YoY indicates steady demand recovery across key channels and/or geographies. Profit growth outpaced revenue: operating income +18.2% and net income +29.7% YoY, signaling improved mix, pricing, and operating efficiency. Margin expansion from gross to operating levels suggests SG&A discipline and possibly scale benefits; monitoring whether this persists as growth moderates will be important. The positive gap between ordinary and operating income (~¥0.64bn) implies supportive non-operating items (e.g., FX gains, financial income), which may not be recurring; core growth should be assessed primarily on operating trends. Asset turnover of 0.77x is reasonable given the business profile; enhancements in inventory turns could unlock further growth efficiency. Without cash flow disclosure, we cannot corroborate earnings growth with cash conversion, an important element for sustainability. Near-term outlook depends on maintaining gross margin resilience against input costs and FX, and on the company’s ability to sustain SG&A productivity. Overall, revenue growth appears steady and profit quality is improving, but reliance on non-operating tailwinds should be monitored.

Financial Health

Liquidity is strong: current ratio 4.23x and quick ratio 3.63x, supported by current assets of ¥73.46bn versus current liabilities of ¥17.38bn. Working capital stands at ¥56.08bn, providing a sizable buffer for operations and procurement. Solvency is robust with total liabilities of ¥23.70bn against equity of ¥80.08bn, resulting in a low liabilities-to-equity ratio of ~0.30x and implied equity ratio near 76% (despite the dataset showing 0% due to non-disclosure). Interest expense is minimal at ¥56m and coverage is ~179x on operating income, suggesting negligible debt service risk. Asset base of ¥105.16bn is predominantly equity-funded, limiting refinancing or covenant risks. Inventory at ¥10.36bn appears manageable relative to sales, though turn metrics cannot be calculated without period‑average balances.

Cash Flow Quality

Operating cash flow, investing cash flow, and financing cash flow are not disclosed in this dataset (zeros indicate unreported), so OCF/NI and free cash flow metrics cannot be validated. Earnings quality is inferred from strong gross and operating margins and limited reliance on financial leverage; however, without OCF, we cannot confirm cash conversion. Working capital is substantial, and the ratio of inventories to revenue appears reasonable, but we cannot assess period‑over‑period movements or the cash impact of receivables/payables. Depreciation and amortization are not disclosed here, so EBITDA and non‑cash expense contributions to earnings cannot be analyzed from this extract. Given these gaps, cash flow quality assessment is constrained and should be revisited upon disclosure of the statement of cash flows.

Dividend Sustainability

Dividend per share and payout ratios are not disclosed in this dataset (zeros indicate unreported), preventing a direct payout or FCF coverage assessment. With net income of ¥7.04bn and a conservative balance sheet, capacity for shareholder returns appears supported by solvency metrics; however, without OCF and FCF data we cannot judge sustainability or cash coverage. Policy signals (target payout, base-plus-variable frameworks) are not available in this extract. We therefore refrain from conclusions on dividend trajectory and await actual DPS and cash flow disclosures to evaluate coverage and consistency.

Risk Assessment

Business Risks:

• Input cost inflation (e.g., resin, packaging) pressuring gross margin
• Foreign exchange volatility affecting revenue translation and COGS
• Demand variability across channels and geographies impacting operating leverage
• Product quality and safety risks inherent to consumer and infant care categories
• Competitive pricing pressure potentially eroding margins
• Inventory management and potential channel destocking

Financial Risks:

• Non-operating income volatility (e.g., FX gains/losses) affecting ordinary income
• Working capital swings impacting cash conversion absent disclosed OCF
• Potential tax rate fluctuations around the implied ~29% effective rate
• Limited visibility on lease and off-balance-sheet obligations from this extract

Key Concerns:

• Lack of disclosed cash flow data limits assessment of earnings-to-cash conversion
• Dividend data not disclosed, constraining payout sustainability analysis
• Portion of ordinary income driven by non-operating items may not be recurring
• Sustaining gross and operating margin gains amid input and FX headwinds

Investment Implications

Key Takeaways:

• Steady top-line growth (+5.9% YoY) with outsized operating profit growth (+18.2% YoY)
• Robust gross margin (46.6%) and improved operating margin (~12.5%) indicate cost discipline
• ROE of 8.78% primarily driven by profitability rather than leverage (leverage 1.31x)
• Exceptional liquidity (current ratio 4.23x; quick ratio 3.63x) and low leverage (~0.30x liabilities/equity)
• Ordinary income exceeds operating income by ~¥0.64bn, implying non-operating tailwinds
• Cash flow and dividend data are not disclosed in this dataset; conclusions on cash conversion and payouts are limited

Metrics to Watch:

• Gross margin trajectory and input cost pass-through
• SG&A ratio to sales and operating margin sustainability
• Inventory days and working capital intensity
• Ordinary vs operating income split (recurrence of non-operating gains)
• Effective tax rate normalization vs the implied ~29%
• Disclosure of OCF and FCF to validate earnings quality
• Actual DPS and payout policy updates

Relative Positioning: The company exhibits stronger-than-average balance sheet resilience and liquidity with mid-teens operating profitability approaching best-in-class levels for branded consumer goods in Japan, though confirmation of cash conversion and dividend policy is pending due to undisclosed cash flow and DPS data in this period.

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