Seiyu Kogyo Co., Ltd. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥15.31B
• Operating Income: ¥1.14B
• Net Income: ¥478M
• 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

Seiyu Kogyo Co., Ltd. (Consolidated, JGAAP) delivered solid FY2025 Q4 results with clear operating leverage and strong cash generation. Revenue rose 11.6% YoY to ¥15.308bn, while operating income grew faster at 38.5% to ¥1.141bn, implying meaningful margin expansion. Net income increased 26.1% to ¥603m, bringing the net margin to 3.94%. Gross profit of ¥1.864bn translates to a 12.2% gross margin, and the operating margin stands at approximately 7.45%, a notable improvement versus the prior year given the revenue differential. Ordinary income of ¥1.025bn indicates a roughly 6.7% ordinary margin, after absorbing interest expense of ¥68m. DuPont decomposition points to an ROE of 10.8%, driven by a net margin of 3.94%, asset turnover of 0.932x, and financial leverage of 2.94x. Using reported assets and equity, the implied equity ratio is approximately 34% (¥5.584bn/¥16.426bn), though the disclosed “equity ratio” field shows 0.0% and should be treated as not reported. Operating cash flow was robust at ¥1.791bn, equal to 2.97x net income, signaling high earnings quality and favorable working capital dynamics. Free cash flow was strong at ¥1.046bn after ¥745m of investing outflows, suggesting internally funded growth and deleveraging capacity. Liquidity appears adequate with a current ratio of 135% and positive working capital of ¥1.597bn. Interest coverage is comfortable at 16.7x, underscoring manageable financial risk at current earnings power. The debt-to-equity ratio of 1.95x indicates a moderately leveraged balance sheet, but one that is supported by stable cash generation. Dividend fields show 0.00 (likely not disclosed), so distribution policy cannot be assessed from the provided data; however, free cash flow capacity appears ample. Several items (inventories, cash and equivalents, equity ratio, DPS, shares outstanding) are unreported rather than zero, constraining precision on some ratios (e.g., quick ratio quality, per-share book value). Overall, the company exhibits improving profitability, solid ROE for a mid-cap industrial/services profile, and high cash conversion, albeit with moderate leverage and data gaps that limit full granularity.

Profitability Analysis

ROE was 10.8%, decomposed as Net Margin 3.94% x Asset Turnover 0.932x x Financial Leverage 2.94x. The ROE level is supported more by operating efficiency (asset turnover near 1.0x) and leverage than by high net margins. Gross margin was 12.2% (¥1,864m/¥15,308m), and operating margin about 7.45% (¥1,141m/¥15,308m), indicating good cost control and SG&A discipline (implied SG&A ≈ ¥723m, ~4.7% of sales). Operating income growth (+38.5% YoY) outpaced revenue growth (+11.6% YoY), evidencing positive operating leverage from fixed-cost absorption and/or mix. Ordinary margin (~6.7%) reflects limited financial drag given interest expense of ¥68m and strong EBIT. Net margin at 3.94% is consistent with industrial/service businesses with project-based revenues. EBITDA of ¥1.449bn yields a 9.5% margin, providing a healthy buffer for interest and maintenance capex. The interest coverage ratio of 16.7x (EBIT/interest) confirms ample headroom even under moderate earnings volatility. Effective tax rate appears as 0.0% in the metrics table, but with income tax expense of ¥258m and net income of ¥603m, the displayed tax rate metric is clearly not representative; a precise ETR cannot be derived without pretax income, but it is non-zero.

Growth Assessment

Top-line growth of 11.6% YoY indicates healthy demand momentum. The quality of growth appears favorable given operating income growth of 38.5% and EBITDA margin at 9.5%, suggesting mix improvement and cost scaling benefits. Profit growth outpacing sales implies margin expansion, likely from better project execution, pricing, or procurement efficiencies. Ordinary income of ¥1.025bn aligns with strong underlying operations after financing costs. Net income grew 26.1% to ¥603m, confirming that most of the operating gains are flowing through to the bottom line. Cash flow growth is even stronger, with OCF at 2.97x net income, indicating that growth is not reliant on working capital build. Investing cash outflow of ¥745m likely reflects capital spending to support future growth; the company still generated ¥1.046bn FCF, implying disciplined capex or high returns on incremental investment. Without backlog/order data, the durability of the revenue growth cannot be fully assessed, but current profitability suggests improved execution. Key growth uncertainties include demand cyclicality, timing of large projects, and input cost trends. Overall outlook: cautiously positive given margin trajectory and cash conversion, tempered by project-cycle visibility limitations due to data gaps.

Financial Health

Liquidity: Current ratio 135.1% and working capital of ¥1,597m indicate adequate short-term coverage. The quick ratio equals the current ratio only because inventories are unreported (0 in the dataset); true quick ratio may be lower if inventories are material. Solvency: Debt-to-equity is 1.95x, indicating moderate leverage that remains serviceable given interest coverage of 16.7x and strong OCF. Capital structure: Total assets ¥16.426bn and total equity ¥5.584bn imply an equity ratio of ~34% (inferred), though the reported equity ratio field is unreported. Ordinary income comfortably exceeds interest expense (¥1,025m vs. ¥68m), adding resilience. Financing CF of -¥766m suggests net repayments or other returns to stakeholders; details are not disclosed. Overall, balance sheet strength is satisfactory, supported by cash generation, but leverage warrants monitoring in a downturn.

Cash Flow Quality

Earnings quality is high: OCF/Net Income is 2.97x (¥1,791m/¥603m), indicating strong cash realization and favorable working capital behavior. Free cash flow was ¥1,046m after ¥745m investing outflows, leaving ample internal funding for debt reduction or growth. EBITDA coverage of interest is strong; EBIT-based interest cover at 16.7x corroborates low financing risk at current run-rate. Working capital: positive at ¥1,597m; however, inventories and cash balances are unreported, limiting precise assessment of liquidity granularity and the quick ratio. The strong OCF relative to EBITDA suggests not only solid margins but also effective collection/billing on projects and/or advances received. Investing CF appears primarily capex; absent asset sale detail, we assume capex dominated. Overall, cash flow quality is robust, with low reliance on external funding in the period.

Dividend Sustainability

Dividend per share is shown as 0.00 and payout ratio 0.0%, but per instruction, these should be treated as not disclosed rather than actual zero. Without DPS or declared payout policy, we cannot calculate coverage from earnings or FCF on a per-share basis. From a capacity standpoint, free cash flow of ¥1.046bn and net income of ¥603m indicate room for distributions while maintaining balance sheet flexibility, assuming no step-up in capex or working capital needs. Financing CF of -¥766m could reflect debt repayment or shareholder returns; the split is not available. Outlook: policy unknown; sustainability cannot be concluded from the dataset, but underlying FCF generation is supportive of potential distributions if adopted. We recommend monitoring formal guidance, shareholder return policy statements, and AGM materials for clarity.

Risk Assessment

Business Risks:

• Demand cyclicality and timing risk for project- or contract-based revenue
• Input cost inflation (materials, subcontracting) potentially compressing gross margins
• Labor availability and wage pressure impacting execution and SG&A
• Project execution risk (cost overruns, penalties) affecting margins
• Customer concentration risk (not disclosed) potentially elevating earnings volatility
• Limited visibility due to lack of disclosed backlog/order intake metrics

Financial Risks:

• Moderate leverage (Debt-to-equity 1.95x) increasing sensitivity to downturns
• Refinancing and interest rate risk despite current 16.7x coverage
• Working capital swings inherent to project businesses, potentially impacting OCF
• Data gaps (cash balance, inventories) limit precise liquidity assessment
• Potential covenant constraints not disclosed

Key Concerns:

• Equity ratio data unreported; inferred ~34% but not formally disclosed
• Dividend policy not disclosed, reducing clarity on capital allocation
• Effective tax rate shown as 0.0% in metrics is clearly not representative
• Inventories and cash balances unreported, obscuring true quick liquidity
• Reliance on operating leverage; margins could compress if revenue growth slows

Investment Implications

Key Takeaways:

• Revenue up 11.6% YoY with operating income up 38.5%, demonstrating margin expansion
• ROE at 10.8% supported by solid asset turnover (0.932x) and moderate leverage (2.94x)
• Strong cash conversion: OCF/Net Income 2.97x; FCF ¥1.046bn
• Adequate liquidity (current ratio 135%) and comfortable interest coverage (16.7x)
• Moderate leverage (D/E 1.95x) is a watchpoint but currently manageable
• Dividend policy undisclosed; capital returns pathway unclear

Metrics to Watch:

• Order backlog and book-to-bill (not disclosed)
• Gross and operating margin trajectory
• OCF/Net Income and working capital turns
• Interest coverage and net debt to EBITDA
• Capex intensity versus growth (FCF sustainability)
• Equity ratio and D/E trend
• Formal dividend/return policy disclosures

Relative Positioning: Within industrial/project-oriented peers, profitability and cash conversion appear above average this period, with ROE of 10.8% and FCF strength offsetting a moderately leveraged balance sheet; visibility is somewhat below peers due to several unreported balance sheet and shareholder return disclosures.

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