Tokai Kisen Co.,Ltd. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥10.99B
• Operating Income: ¥377M
• Net Income: ¥384M
• EPS: ¥109.28

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

Tokai Kisen (9173) reported FY2025 Q3 (cumulative) revenue of ¥10,995 million, declining 2.8% YoY, with profitability under pressure as operating income fell 37.1% YoY to ¥377 million. Gross margin stands at 15.4%, and operating margin compressed to roughly 3.4%, reflecting cost inflation and/or weaker operating leverage on slightly lower sales. Net income was ¥239 million, down 20.2% YoY, implying a net margin of 2.17%. Ordinary income of ¥328 million sits below operating income, indicating net non-operating costs (notably interest expense of ¥97 million) despite possible minor non-operating gains elsewhere. DuPont shows ROE of 3.55% driven by a thin net margin (2.17%), modest asset turnover (0.511x), and relatively high financial leverage (3.20x). Balance sheet leverage is notable: liabilities/equity is 2.40x, while an implied equity ratio is approximately 31.2% (equity of ¥6,723 million over assets of ¥21,528 million), despite the disclosed “equity ratio 0.0%” being a non-disclosure artifact. Liquidity looks adequate with a current ratio of 127.5% and a quick ratio of 126.2%, supported by positive working capital of ¥1,685 million. Interest coverage of about 3.9x (operating income/interest expense) is acceptable but leaves limited cushion if earnings weaken further. Reported cash flow figures (OCF/FCF) and depreciation are undisclosed (shown as zero) and therefore cannot be interpreted as actual zeros; for an asset-intensive ferry operator, this is a key limitation for assessing cash generation and capex needs. EPS is ¥109.28; using net income divided by EPS implies roughly 2.19 million shares, but formal share count and BVPS are undisclosed in the feed. The decline in operating profit outpaced the revenue drop, suggesting adverse cost mix (fuel, labor, maintenance, or port-related expenses) and weaker operating leverage. Ordinary profit and net profit were cushioned versus operating profit, but the tax burden (¥163 million) was sizable relative to net income. In sum, Tokai Kisen remains profitable but with compressed margins, moderate liquidity, and leveraged capital structure typical of its asset-heavy model. Absent cash flow and D&A disclosure, assessment of earnings quality and dividend capacity must be cautious. Near-term outlook hinges on demand recovery, pricing and fuel surcharge pass-through, and cost control, while medium-term performance depends on fleet renewal economics and financing costs. Data limitations (cash flows, D&A, equity ratio, dividend data) are material and are treated as non-disclosed items rather than true zeros.

Profitability Analysis

ROE_decomposition: ROE 3.55% = Net margin 2.17% x Asset turnover 0.511x x Financial leverage 3.20x. The weak net margin is the main drag; leverage is doing a meaningful share of the work to support ROE. margin_quality: Gross margin 15.4% and operating margin ~3.4% (¥377m/¥10,995m) indicate limited pricing power vs. input costs. Net margin of 2.17% reflects non-operating expenses (notably ¥97m interest) and taxes (¥163m). EBITDA is undisclosed; given the capital-intensive model, D&A is likely significant and would normally lift EBITDA margin materially above operating margin. operating_leverage: Operating income declined 37.1% on a 2.8% revenue drop, implying negative operating leverage in the period, likely due to fuel, maintenance, labor, or seasonal mix effects. This suggests profitability is sensitive to even modest revenue movements.

Growth Assessment

revenue_sustainability: Revenue declined 2.8% YoY to ¥10,995m; sustainability hinges on passenger volumes, tourism trends to service regions, freight demand, and fare discipline, including fuel surcharge mechanisms. profit_quality: Ordinary income (¥328m) trails operating income (¥377m) due to interest costs, and net income (¥239m) reflects a meaningful tax burden. With D&A and cash flows undisclosed, accrual-to-cash conversion cannot be validated. outlook: Short-term outlook is contingent on seasonality (Q4 travel demand), weather disruption risk, and fuel price trajectory. Medium term rests on fleet efficiency, route optimization, and cost pass-through; financing costs and capex planning will influence margin recovery and ROE.

Financial Health

liquidity: Current ratio 127.5%, quick ratio 126.2%, and working capital of ¥1,685m indicate adequate short-term coverage. Inventories are small (¥74m), so liquidity is not inventory-dependent. solvency: Total liabilities ¥16,147m vs equity ¥6,723m (debt-to-equity ~2.40x) and implied equity ratio ~31.2% suggest a leveraged but not extreme balance sheet for an asset-heavy operator. Interest coverage ~3.9x provides a moderate cushion. capital_structure: Assets/equity leverage is 3.20x. The cost of debt (proxied by interest expense) weighs on ordinary profit; sensitivity to interest rates is non-trivial given leverage.

Cash Flow Quality

earnings_quality: Operating CF and investing CF are undisclosed (shown as zero). Without OCF and D&A, we cannot assess accrual intensity, non-cash components, or maintenance vs. growth capex. For this industry, D&A is typically meaningful and OCF should generally exceed net income over a cycle if capex is not spiking. FCF_analysis: FCF is undisclosed. Given likely ongoing fleet capex, true FCF can be volatile and may trail net income during renewal cycles. working_capital: Positive working capital (¥1,685m) supports operations; with small inventories, receivables and payables management will be key to cash conversion, but detailed turnover metrics are unavailable.

Dividend Sustainability

payout_ratio_assessment: Annual DPS and payout ratio fields are undisclosed (displayed as zero). With EPS of ¥109.28 and positive earnings, payout capacity exists in principle, but must be weighed against leverage and capex requirements. FCF_coverage: FCF coverage cannot be assessed due to undisclosed OCF and capex. In a capital-intensive model, sustainable dividends typically require stable OCF and visibility on maintenance capex. policy_outlook: Absent formal guidance here, dividend policy is likely conservative, prioritizing balance sheet resilience and fleet investment over high payout during periods of margin pressure.

Risk Assessment

Business Risks:

• Fuel price volatility and adequacy/timing of fuel surcharge pass-through
• Demand cyclicality tied to tourism and regional economic conditions
• Weather-related disruptions (typhoons, rough seas) impacting load factors and schedules
• Regulatory and safety compliance costs for marine operations
• Competition from alternative transport modes and routes
• Operational risk from aging fleet and maintenance scheduling

Financial Risks:

• Leverage (liabilities/equity ~2.40x) amplifying earnings volatility
• Interest rate exposure affecting interest expense (~¥97m) and ordinary profit
• Refinancing risk around vessel-related borrowings and leases
• Potential capex spikes for fleet renewal pressuring FCF and liquidity
• Limited interest coverage (~3.9x) if operating income weakens further

Key Concerns:

• Operating margin compression despite modest revenue decline
• Undisclosed cash flow and D&A data limiting visibility on earnings quality and FCF
• Sensitivity of profitability to fuel and weather-driven volume variability

Investment Implications

Key Takeaways:

• Revenue down 2.8% YoY with disproportionate 37.1% drop in operating income indicates adverse cost mix and negative operating leverage.
• ROE of 3.55% is modest and primarily constrained by thin net margins.
• Liquidity is adequate (current ratio 127.5%), but leverage is meaningful (D/E ~2.40x; implied equity ratio ~31%).
• Interest coverage around 3.9x is acceptable but leaves limited downside buffer.
• Lack of OCF, FCF, and D&A disclosure is a major gap for evaluating cash generation and dividend capacity.

Metrics to Watch:

• Passenger volumes, load factors, and average fare/surcharge realization
• Fuel cost per unit and pass-through effectiveness
• Operating margin and ordinary margin progression
• Depreciation expense and planned capex (fleet renewal schedule)
• Operating cash flow, free cash flow, and net debt/EBITDA once disclosed
• Interest coverage and equity ratio trajectory

Relative Positioning: Within asset-intensive domestic transport operators, Tokai Kisen exhibits typical leverage and thin margins with heightened sensitivity to fuel and demand cycles; performance improvement will likely hinge on cost control, pricing discipline, and capital allocation around fleet assets.

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
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