Nakamichi Lease Co., Ltd. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥38.29B
• Operating Income: ¥1.66B
• Net Income: ¥1.28B
• EPS: ¥171.80

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

Chudo Lease Co., Ltd. (single-entity, JGAAP) delivered solid earnings momentum in FY2025 Q3, with revenue up 5.8% year over year to ¥38.29bn and operating income up 29.0% to ¥1.66bn, indicating meaningful margin expansion. Gross profit of ¥2.97bn implies a gross margin of 7.8%, consistent with a leasing model characterized by thin product margins but stable spreads. Operating margin improved to roughly 4.3%, supporting the sharp acceleration in profit versus sales growth. Ordinary income reached ¥1.85bn, exceeding operating income by about ¥0.19bn, suggesting non-operating gains or financial income were supportive this quarter. Net income rose 24.3% to ¥1.28bn, translating to a net margin of 3.35% and EPS of ¥171.80. DuPont metrics show ROE at 9.55%, driven by a modest net margin (3.35%), low asset turnover (0.255x), and high financial leverage (about 11.2x). The business remains asset-intensive, with total assets of ¥150.06bn and total equity of ¥13.44bn; implied equity ratio is roughly 9% despite the equity ratio field being undisclosed. Liquidity appears strong on headline metrics with a current ratio of 2.74x, supported by ¥130.22bn of current assets versus ¥47.50bn of current liabilities, though leasing receivables dominate current assets and are not cash-equivalents. Interest coverage is robust at 36.2x (operating income/interest expense), indicating ample buffer against funding cost volatility. The effective tax rate calculated from disclosed figures is approximately 26–27%, despite the “0.0%” placeholder in the metric table. Cash flow statement line items were not disclosed this quarter, preventing direct assessment of operating cash conversion and free cash flow. Dividend metrics were also undisclosed; therefore, payout and FCF coverage cannot be verified. The balance sheet shows high leverage typical for a leasing company (debt-to-equity ~10.9x), which magnifies ROE but necessitates disciplined risk and funding management. Overall, earnings quality appears reasonable given broad-based margin improvement and strong interest coverage, but the lack of cash flow disclosures limits assessment of cash conversion and dividend capacity. Key watchpoints include funding cost trends, credit performance, and the sustainability of non-operating profit contributions.

Profitability Analysis

ROE_decomposition: ROE 9.55% = Net margin 3.35% × Asset turnover 0.255× × Financial leverage 11.16× (DuPont). The leverage component is the primary driver given the asset-intensive model. margin_quality: Gross margin 7.8% (¥2,968m/¥38,292m); operating margin ~4.34% (¥1,662m/¥38,292m); ordinary margin 4.83% (¥1,849m/¥38,292m); net margin 3.35%. The step-up from operating to ordinary income (¥187m) implies supportive non-operating items (e.g., interest/dividend income or gains), enhancing overall profitability this quarter. operating_leverage: Revenue +5.8% YoY versus operating income +29.0% YoY indicates positive operating leverage and cost discipline. Fixed-cost absorption likely improved as volumes grew, expanding operating margin.

Growth Assessment

revenue_sustainability: Top-line growth of 5.8% suggests steady demand and portfolio expansion. Given asset turnover of 0.255x, growth relies on balance sheet capacity and funding access; sustaining growth likely requires continued asset origination and stable funding lines. profit_quality: Net income +24.3% outpaced revenue, driven by margin expansion and non-operating contribution. Interest coverage at 36.2x supports underlying profitability resilience, while an implied effective tax rate around 26–27% suggests normalized tax burden. outlook: Assuming stable credit costs and funding costs, current margin momentum could be maintained. However, the sustainability of non-operating gains and the pace of balance sheet growth will be key to sustaining profit growth in coming quarters.

Financial Health

liquidity: Current assets ¥130.22bn vs current liabilities ¥47.50bn yields a current ratio of 2.74x and working capital of ¥82.72bn. Note that in leasing models, receivables dominate current assets; actual liquidity depends on collection and committed credit facilities rather than cash balances (cash not disclosed). solvency: Total liabilities ¥146.59bn and equity ¥13.44bn imply debt-to-equity ~10.9x and an implied equity ratio near 9% (equity ratio field undisclosed). This leverage is typical for leasing firms but heightens sensitivity to funding conditions. capital_structure: High reliance on liabilities to fund assets; interest expense remains modest at ¥45.9m relative to operating income, indicating current funding costs are well-managed. Maintaining diversified funding sources and tenor matching remains important.

Cash Flow Quality

earnings_quality: With interest coverage at 36.2x and expanding operating margin, accrual earnings appear supported. However, absent cash flow disclosures, the degree of cash conversion cannot be validated this quarter. FCF_analysis: Operating CF and investing CF were not disclosed; therefore, free cash flow cannot be calculated. In leasing, growth typically consumes cash via portfolio buildup, so positive earnings may coincide with negative FCF during expansion. working_capital: Working capital increased to ¥82.72bn, reflecting a large current-asset base versus current liabilities. Receivable collection, delinquency trends, and asset liquidation values are critical to cash conversion but were not disclosed.

Dividend Sustainability

payout_ratio_assessment: Dividend per share and payout ratio were not disclosed; EPS is ¥171.80. Without DPS or OCF data, payout ratio and coverage cannot be assessed. FCF_coverage: Free cash flow was not disclosed; FCF coverage of dividends cannot be determined. policy_outlook: Given leverage (~10.9x) and asset-growth needs typical of lessors, capital allocation likely balances shareholder returns with equity base reinforcement. Confirmation requires management guidance or dividend policy disclosure.

Risk Assessment

Business Risks:

• Credit risk on lessees and residual value risk on leased assets
• Dependence on continued access to funding markets and bank lines
• Margin pressure from rising funding costs or competitive pricing
• Concentration risk in key customer segments or asset categories
• Regulatory and accounting changes affecting lease classification and capital needs

Financial Risks:

• High leverage (debt-to-equity ~10.9x) amplifies sensitivity to asset quality and funding costs
• Potential maturity mismatch between assets and liabilities
• Reliance on non-operating income to bridge operating and ordinary profits in some periods
• Cash flow volatility from portfolio growth and working capital swings

Key Concerns:

• Sustainability of margin gains as growth moderates
• Visibility on operating and free cash flow given undisclosed CF statements
• Maintaining strong interest coverage amid potential rate increases

Investment Implications

Key Takeaways:

• Revenue grew 5.8% YoY to ¥38.29bn with operating income up 29.0%, evidencing operating leverage
• ROE of 9.55% is driven primarily by high financial leverage (≈11×)
• Interest coverage is strong at 36.2×, indicating resilient earnings versus funding costs
• Implied equity ratio is ~9%, consistent with a leveraged leasing balance sheet
• Cash flow and dividend data were not disclosed, limiting assessment of cash conversion and distributions

Metrics to Watch:

• Net interest spread/yield on leases and average funding cost
• Credit metrics: delinquency, charge-offs, and provisioning
• Ordinary-to-operating income gap (reliance on non-operating items)
• OCF/Net income ratio and free cash flow once disclosed
• Equity ratio and debt-to-equity trend as the portfolio grows

Relative Positioning: Performance aligns with a typical Japanese leasing model: thin margins but stable spreads, high leverage, and solid interest coverage. Profit growth outpaced revenue on improved operating efficiency; sustainability hinges on funding cost discipline and asset quality.

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
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