TOYO Corporation FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥32.56B
• Operating Income: ¥1.91B
• Net Income: ¥1.54B
• EPS: ¥55.55

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

Toyo Corporation (81510) reported FY2025 consolidated results under JGAAP with revenue of ¥32.56bn, down 7.1% year over year, signaling a softer demand environment or delayed project recognition. Despite a robust gross profit margin of 46.6% (gross profit ¥15.18bn), operating income contracted 43.1% YoY to ¥1.91bn, indicating significant operating deleverage and higher fixed-cost absorption. Ordinary income was ¥1.99bn, and net income fell 52.6% YoY to ¥1.20bn, compressing net margin to 3.67%. EBITDA totaled ¥2.91bn with an 8.9% margin, highlighting that the bulk of the profitability erosion came from SG&A and other operating expenses rather than gross margin deterioration. The DuPont decomposition shows a calculated ROE of 4.25%, driven by a modest net margin (3.67%), asset turnover of 0.815x, and conservative financial leverage of 1.42x. Liquidity remains strong with a current ratio of 186.4% and a quick ratio of 146.0%, supported by ¥8.54bn of working capital. Solvency appears solid: total equity is ¥28.12bn versus total liabilities of ¥11.01bn, implying a low leverage position (debt-to-equity 0.39x as reported, broadly consistent with a liabilities-to-equity perspective). Operating cash flow was healthy at ¥2.20bn, 1.84x net income, and free cash flow was positive at ¥1.43bn after ¥0.77bn of investing outflows. Interest coverage is very strong at about 302x, reflecting negligible interest burden and ample operating cushion. Inventory ended at ¥4.00bn, roughly 73–74 days on cost of sales, which is reasonable for a technology solutions distributor/integrator profile. Effective tax rate calculated from disclosed figures is approximately 40% (¥0.80bn tax on roughly ¥2.0bn pre-tax), even though the “effective tax rate” metric is shown as 0.0% in the summary (treated as unreported). The equity ratio is displayed as 0.0% in the summary but, using available balance sheet data, we estimate approximately 70.4% (¥28.12bn equity/¥39.94bn assets). Dividend data (DPS, payout, FCF coverage) appear unreported; assessment below focuses on capacity rather than actual policy. Overall, the period shows resilient gross profitability and strong cash conversion offset by meaningful operating margin compression and lower ROE. The balance sheet strength and positive FCF provide flexibility to navigate demand variability and invest in growth. Near-term outlook hinges on order timing, SG&A normalization, and recovery in end-market spending. Data limitations (notably cash balance, DPS, shares outstanding) constrain precision in some per-share and policy analyses; conclusions rely on disclosed non-zero items and standard derivations.

Profitability Analysis

ROE_decomposition: ROE 4.25% = Net margin 3.67% × Asset turnover 0.815 × Financial leverage 1.42. The subdued ROE primarily reflects weaker net margin and sub-1x asset turnover, with only modest leverage. margin_quality: Gross margin at 46.6% is strong, implying value-add in solutions/integration or favorable product mix. Operating margin compressed to ~5.9% (¥1.91bn/¥32.56bn) from prior year levels, pointing to elevated SG&A or reduced scale benefits. Net margin at 3.67% reflects normal tax expense (~40%) and negligible interest burden. operating_leverage: Revenue fell 7.1% YoY, but operating income fell 43.1% YoY, evidencing high operating leverage and a relatively fixed cost base. This suggests profitability is sensitive to volumes and revenue mix; incremental sales recovery could disproportionately lift operating profit, while further softness would pressure margins.

Growth Assessment

revenue_sustainability: Top-line decline of 7.1% indicates softer demand or project timing slippage. Gross margin resilience suggests pricing/mix held up, but sustaining revenue will depend on order intake and backlog conversion. profit_quality: EBITDA margin at 8.9% and OCF/NI of 1.84 indicate reasonable earnings quality despite margin compression. Ordinary income (¥1.99bn) closely tracks pre-tax estimates, and tax expense aligns with a ~40% rate, implying limited one-offs in tax. outlook: Key swing factors include recovery in customer capex cycles, timing of large systems deliveries, and normalization of SG&A. With low financial leverage and positive FCF, the company appears positioned to support growth initiatives once demand improves, but near-term growth visibility is tempered by the recent revenue decline.

Financial Health

liquidity: Current ratio 186.4%, quick ratio 146.0%, working capital ¥8.54bn; these indicate solid liquidity headroom. Inventory of ¥4.00bn equates to roughly 73–74 days of cost of sales. solvency: Total liabilities ¥11.01bn vs equity ¥28.12bn; estimated equity ratio ~70.4% (computed) despite the reported 0.0% placeholder. Interest coverage ~302x evidences minimal refinancing risk under current structure. capital_structure: Debt-to-equity reported at 0.39x suggests conservative balance sheet leverage. Financial leverage in DuPont at 1.42x is modest, indicating low gearing and capacity to absorb shocks.

Cash Flow Quality

earnings_quality: OCF ¥2.20bn exceeds NI ¥1.20bn (OCF/NI 1.84), supporting the quality of earnings. Limited interest burden (¥6.34m) minimizes financial distortions. FCF_analysis: FCF of ¥1.43bn after ¥0.77bn investing outflows demonstrates internal funding capacity for operations and selective investments. Financing CF of -¥0.97bn implies outflows to shareholders and/or debt repayments. working_capital: Inventory appears well-managed for the business model (~73–74 days on COGS). Receivables and payables are not disclosed, but the strong OCF suggests net working capital was a positive or manageable factor this period.

Dividend Sustainability

payout_ratio_assessment: Dividend per share and payout ratio are shown as 0.00, which we treat as not disclosed. On capacity, NI of ¥1.20bn and FCF of ¥1.43bn indicate room to fund ordinary dividends if policy permits. FCF_coverage: With positive FCF and low interest expense, coverage for a hypothetical ordinary dividend would be comfortable; exact coverage cannot be computed without DPS. policy_outlook: Absent disclosed DPS or stated policy, we infer that balance sheet strength (estimated ~70% equity ratio) and recurring cash generation support dividend continuity potential, but actual distributions will depend on management policy and capital allocation priorities.

Risk Assessment

Business Risks:

• Demand cyclicality in customer industries affecting test and measurement or systems spending
• Project timing and acceptance risk leading to revenue recognition volatility
• Product and supplier concentration risk impacting margin and availability
• Foreign exchange exposure on imported equipment and overseas transactions
• Competitive pricing pressure in distribution and solutions markets
• Technology obsolescence risk requiring continual portfolio refresh

Financial Risks:

• Operating leverage causing outsized profit swings on small revenue changes
• Working capital volatility (inventories, receivables) affecting OCF timing
• Margin compression risk from elevated SG&A or weaker mix
• FX-induced gross margin variability
• Potential reduction in ordinary income if demand does not recover

Key Concerns:

• Sharp YoY decline in operating income (-43.1%) and net income (-52.6%)
• ROE at 4.25%, below typical cost of equity thresholds
• Sub-1x asset turnover (0.815x) limiting ROE despite strong equity base
• Visibility on dividend policy is limited due to unreported DPS

Investment Implications

Key Takeaways:

• Revenue decline of 7.1% drove pronounced operating deleverage
• Gross margin remained strong at 46.6%, cushioning profitability
• ROE modest at 4.25% due to low margin and asset turnover, not leverage
• Liquidity and solvency are strong, providing resilience
• Cash conversion is healthy (OCF/NI 1.84; FCF ¥1.43bn)

Metrics to Watch:

• Order intake and backlog/book-to-bill trends
• SG&A ratio and operating margin rebound trajectory
• Asset turnover and inventory days
• OCF/NI and working capital movements
• ROE progression and capital allocation (buybacks/dividends)
• FX rates and gross margin sensitivity

Relative Positioning: Within Japan’s specialty trading and technology solutions peers, the company appears conservatively leveraged with strong gross margins but currently lower ROE due to subdued margins and asset turnover; balance sheet strength provides optionality for recovery.

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