Seiyu Kogyo Co., Ltd. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥15.31B
• Operating Income: ¥1.14B
• Net Income: ¥660M
• EPS: ¥214.38

Income Statement

Balance Sheet

Cash Flow Statement

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: A solid Q4 finish with double-digit top-line growth and outsized operating profit expansion, delivering a respectable 10.8% ROE and strong cash generation. Revenue rose 11.6% YoY to 153.08, while operating income climbed 38.5% YoY to 11.41, and net income advanced 26.1% YoY to 6.03. Gross profit reached 28.18 and SG&A was contained at 16.76, supporting operating leverage. The operating margin is approximately 7.45% (11.41/153.08), and EBITDA margin stands at 10.1% with EBITDA of 15.40. Based on implied prior-year figures, operating margin expanded by roughly 144 bps YoY (from ~6.01% to ~7.45%), reflecting improved cost discipline and scale benefits. Ordinary income grew 28.7% to 10.25 despite non-operating expenses (1.51) exceeding non-operating income (0.35), with interest expense (1.10) the main drag. Earnings quality is strong: operating cash flow (17.91) was 2.97x net income, and free cash flow was solid at 10.46 after modest capex (-1.10). Liquidity is adequate (current ratio 123.3%) and interest coverage is robust at 10.38x, though leverage is on the higher side (D/E 1.94x) with long-term loans of 45.20. ROIC at 9.4% exceeds typical 7–8% targets, indicating healthy returns on invested capital. Tax burden remains heavy with a 37.5% effective tax rate, tempering the conversion of operating profit to net. Book value per share is approximately 1,981 JPY, and EPS (basic) was 214.38 JPY. Dividend data is limited, but the calculated payout ratio of 14.0% and FCF coverage of 12.37x imply ample headroom for distributions. Balance sheet shows goodwill/intangibles of 8.85/8.91, which should be monitored for impairment risk. Forward-looking, the combination of margin expansion, strong OCF, and above-target ROIC supports continued earnings resilience, provided leverage is managed and non-operating costs (interest) remain contained. Data gaps (e.g., dividend details, inventories, equity-method income) limit granularity, but the available metrics point to a quality quarter.

Profitability Analysis

ROE decomposition (DuPont): ROE 10.8% = Net Profit Margin 3.9% × Asset Turnover 0.932 × Financial Leverage 2.94x. The largest driver of YoY improvement appears to be margin expansion, inferred from operating income growing 38.5% vs revenue 11.6%, lifting operating margin by an estimated ~144 bps to ~7.45%. Business rationale: better cost control (SG&A discipline) and operating leverage on higher volumes likely improved profitability; non-operating headwinds (interest expense) partially offset this at the ordinary income level. Sustainability: underlying operating margin gains look more durable than one-time items given the broad-based OCF strength; however, sustainability depends on maintaining cost efficiencies and price/mix amid demand conditions. Asset turnover at 0.932 suggests a moderately capital-intensive model; no clear sign of deterioration YoY, so operating efficiency appears stable. Financial leverage at 2.94x amplifies ROE meaningfully; while it boosts returns now, it increases sensitivity to funding costs and downturns. Watchpoints: if SG&A growth starts to outpace revenue, the operating leverage could reverse; current period shows the opposite (revenue growth > SG&A growth implicit), which is constructive.

Growth Assessment

Revenue growth of 11.6% YoY to 153.08 indicates healthy demand and/or pricing, with operating profit up 38.5% signaling positive operating leverage. Ordinary income (+28.7%) and net income (+26.1%) lagged operating income growth due to higher non-operating expenses (notably interest), but overall earnings growth remained solid. Gross profit of 28.18 against cost of sales 124.91 confirms improved absolute contribution, while SG&A at 16.76 permitted flow-through to operating profit. Non-operating income (0.35) was modest and non-operating expenses (1.51) meaningful, implying core operations—not one-offs—drove the quarter. EBITDA of 15.40 and a 10.1% margin support a view of sustainable operating cash generation. ROIC at 9.4% is above common 7–8% targets, implying value-accretive growth. Outlook: with leverage manageable and interest coverage strong, growth should be maintainable if the company preserves cost discipline and demand holds; interest cost and tax rate are the main headwinds to net growth. Limited disclosure on segment/affiliate contributions constrains identification of specific growth engines.

Financial Health

Liquidity is adequate: current assets 61.86 vs current liabilities 50.18 yield a current ratio of 123.3% and quick ratio of 123.3%, above 1.0 but below the 1.5 comfort benchmark. No explicit warning is triggered as the current ratio is not below 1.0. Solvency: total liabilities 108.41 vs equity 55.84 produce a D/E of 1.94x—elevated versus conservative benchmarks (1.5x) but below the 2.0x explicit warning threshold. Interest-bearing debt detail shows short-term loans of 5.00 and long-term loans of 45.20, pointing to predominantly long-term funding. Maturity mismatch risk appears contained: cash and deposits (29.74) plus receivables (16.17) comfortably exceed short-term loans (5.00) and provide cushion against current liabilities. Interest coverage is strong at 10.38x, mitigating near-term refinancing risk. Off-balance sheet obligations are not reported; no additional commitments disclosed in the dataset.

Cash Flow Quality

Earnings quality is high: OCF of 17.91 is 2.97x net income (6.03), well above the 0.8–1.0 threshold. Free cash flow of 10.46 after modest capex (-1.10) underscores cash generative operations. The strong OCF relative to NI suggests positive working capital dynamics and/or robust cash conversion of earnings; however, without working capital detail, the exact drivers (receivables/payables inventory movements) are unknown. No signs of aggressive working capital management are evident from the limited data, but monitoring days sales outstanding vs payables would be prudent when disclosed. The company’s cash balance (29.74) provides flexibility to fund ongoing capex and service debt without stress.

Dividend Sustainability

Dividend disclosures are limited, but a calculated payout ratio of 14.0% implies conservative distributions relative to earnings. With FCF at 10.46 and reported FCF coverage of 12.37x, current dividend levels appear well covered by internally generated cash. Given leverage at 1.94x D/E, maintaining a low payout supports de-leveraging or reinvestment if growth opportunities persist. Policy outlook is not disclosed; however, the combination of strong OCF, modest capex, and low payout offers scope for stable to potentially higher dividends if management prioritizes shareholder returns over balance sheet strengthening. Absent explicit DPS history, we refrain from commenting on dividend trajectory beyond coverage.

Risk Assessment

Business Risks:

• Margin sensitivity to input costs and price/mix; operating leverage could reverse if revenue slows.
• High effective tax rate (37.5%) dampens net earnings growth.
• Goodwill and intangible assets (8.85 and 8.91) introduce impairment risk in a downturn.
• Customer/project concentration risk possible (not disclosed), which can drive earnings volatility.

Financial Risks:

• Elevated leverage (D/E 1.94x) increases sensitivity to interest rate rises and credit tightening.
• Non-operating expense burden (interest expense 1.10) weighs on ordinary income.
• Refinancing risk exists albeit mitigated by strong interest coverage (10.38x) and long-term loan profile.
• Liquidity cushion adequate but not abundant relative to benchmark (current ratio 1.23x vs 1.5x reference).

Key Concerns:

• Sustainability of margin gains if SG&A or labor costs accelerate (salaries and allowances 4.51; directors’ compensation 2.12).
• Limited disclosure on segment mix and equity-method income restricts visibility into recurring vs one-time drivers.
• Potential for working capital swings to impact OCF in subsequent periods (details not disclosed).
• Interest rate normalization could lift interest expense from current 1.10, compressing ordinary income.

Investment Implications

Key Takeaways:

• Strong operational quarter: revenue +11.6% YoY and operating income +38.5% with estimated ~144 bps operating margin expansion.
• Quality of earnings confirmed by OCF/NI of 2.97x and FCF of 10.46.
• ROE at 10.8% and ROIC at 9.4% indicate solid capital efficiency.
• Leverage is elevated (D/E 1.94x) but manageable given 10.38x interest coverage and a predominantly long-term debt structure.
• Tax burden (37.5%) and non-operating expenses cap translation of operating gains into net profit.

Metrics to Watch:

• Operating margin trajectory and SG&A intensity (SG&A/revenue) in subsequent quarters.
• Interest expense trend and average funding cost amid rate environment changes.
• Working capital metrics (DSO/DPO) once disclosed, to validate durability of OCF.
• ROIC vs WACC spread to gauge continued value creation.
• Goodwill impairment indicators and segment profit stability.

Relative Positioning: Within a fundamentals context, the company demonstrates above-target ROIC, solid ROE, and strong cash conversion, placing it favorably on profitability and cash quality. However, leverage is higher than conservative peers and the tax/interest drag narrows the gap at the bottom line. Continued margin discipline and deleveraging would improve its relative standing.

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