Green Earth Institute Co.,Ltd. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥1.07B
• Operating Income: ¥-4M
• Net Income: ¥127M
• EPS: ¥11.27

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

Verdict: A mixed quarter with modest topline growth and near break-even operations, but earnings quality is weak and cash outflows are elevated despite a solid liquidity buffer. Revenue rose 7.3% YoY to 10.75, with gross profit of 4.42 and a healthy gross margin of 41.1%. Operating income was slightly negative at -0.04, implying an operating margin of roughly -0.4%, while EBITDA was modestly positive at 0.11, consistent with reported D&A of 0.15. Net income increased 15.3% YoY to 1.27 and reported ROE came in at 6.0%, supported by a calculated net profit margin of 11.8%, asset turnover of 0.362, and leverage of 1.41x. The margin picture is mixed: gross margin is solid, operating margin is essentially flat-to-negative, and reported net margin implies material non-operating or one-off support. Ordinary income is reported at 1.56 (+12.1% YoY), which is inconsistent with the operating loss and small net non-operating income (0.13 vs 0.02 expenses); we treat the ordinary income figure with caution. On a basis-point comparison, we lack prior-period margin detail; qualitatively, operating margin remains roughly flat at around zero with limited operating leverage. Earnings quality is a concern: OCF was -0.49 against net income of +1.27, yielding an OCF/NI ratio of -0.39x, well below the 0.8 threshold. Free cash flow was -2.05, driven by both negative operating cash flow and capex (0.80) within total investing outflows of -1.56. Liquidity is ample with 22.74 in cash, current assets of 26.36, and a current ratio of 433%, providing a long cash runway even with current FCF burn. Leverage is conservative (D/E 0.36x), but interest coverage is weak at -1.99x given near-zero operating profit. Retained earnings remain negative at -12.16, limiting near-term dividend capacity despite positive net income this period. Forward-looking, the key to durable profitability will be converting gross margin into operating leverage by controlling SG&A and improving cash conversion. Near-term risks include continued cash burn and potential reliance on non-operating items to sustain bottom-line profits. We also note data limitations and internal inconsistencies that constrain precision in assessing ordinary earnings momentum.

Profitability Analysis

ROE decomposition: ROE (6.0%) = Net Profit Margin (11.8%) × Asset Turnover (0.362) × Financial Leverage (1.41x). The primary driver of the reported ROE is the relatively high net margin, while asset turnover is low and leverage is modest. Given operating income is negative and EBITDA is only 0.11, the implied net margin likely reflects non-operating or non-cash items rather than core operating profitability. The most notable component is the margin element, which appears out of sync with operating performance; this suggests low sustainability without operating improvement. Business reason: gross margin is decent at 41.1%, but SG&A (5.91) exceeds gross profit (4.42), preventing operating leverage; any net profit likely came from non-operating income and/or below-the-line items. Sustainability assessment: without SG&A discipline and stronger revenue scale, the current ROE level is unlikely to be durable; improvement hinges on scaling revenue while holding SG&A growth below revenue growth. Concerning trends: SG&A (5.91) is 134% of gross profit, indicating insufficient operating scale; interest coverage (-1.99x) is below comfort thresholds; and OCF trails net income materially, flagging earnings quality risk.

Growth Assessment

Topline growth was +7.3% YoY to 10.75, indicating steady but modest expansion. Gross margin of 41.1% demonstrates pricing power or favorable mix, but the inability to cover SG&A led to a slight operating loss, pointing to scale-up constraints. Net income growth (+15.3% YoY to 1.27) appears supported by non-operating or one-off items given the operating loss and weak cash conversion. With EBITDA only 0.11, incremental revenue currently delivers limited operating leverage. Sustainability of revenue growth depends on commercialization progress and customer/revenue mix; absent SG&A containment, incremental growth may not translate into operating profit. Outlook hinges on converting pipeline/projects into recurring revenues while managing fixed costs; near-term bias is for continued near-break-even operations unless cost controls improve.

Financial Health

Liquidity is strong: current assets 26.36 vs current liabilities 6.09 yields a current ratio of 433% and quick ratio of 433%, with cash and deposits of 22.74 anchoring liquidity. No warning on current ratio (<1.0) or D/E (>2.0): D/E is 0.36x (conservative). Maturity mismatch risk is low given sizable cash versus limited reported debt (long-term loans 1.39 and total liabilities 7.61). Interest coverage is weak (-1.99x) due to near-zero operating profit, posing income statement risk if interest costs rise, though balance-sheet solvency remains adequate. Retained earnings are negative (-12.16), reflecting cumulative losses and constraining equity flexibility despite total equity of 21.06. No off-balance sheet obligations were disclosed in the provided data.

Cash Flow Quality

Earnings quality is weak: OCF/Net Income is -0.39x (<0.8), indicating accrual-heavy earnings or timing effects. Operating CF was -0.49 despite positive net income of 1.27, suggesting working capital outflows or non-cash gains supporting profit. Free cash flow was -2.05, driven by negative OCF and capex of 0.80 (within total investing CF of -1.56). With cash of 22.74, the company can fund current burn for an extended period, but persistent negative FCF would erode the cushion. Potential working capital issues include receivables of 1.96 relative to small revenue base; without detailed WC breakdown, we cannot pinpoint drivers. No signs of aggressive WC manipulation can be confirmed from the limited disclosures, but the OCF/NI divergence warrants monitoring.

Dividend Sustainability

No dividends were reported, and payout ratios are not calculable. Given negative retained earnings (-12.16) and negative free cash flow (-2.05), dividend initiation or increases appear unlikely in the near term. Any future distribution policy would need to be underpinned by a sustained shift to positive operating cash flow and restoration of retained earnings.

Risk Assessment

Business Risks:

• Inability to scale revenue sufficiently to cover SG&A, leading to recurring operating losses
• Dependence on non-operating or one-time items to support net income
• Commercialization and customer adoption risk in a niche technology/biotech platform
• Execution risk on R&D-to-revenue conversion given limited operating leverage

Financial Risks:

• Weak earnings quality: OCF/NI at -0.39x
• Negative free cash flow (-2.05) despite positive net income
• Interest coverage at -1.99x, vulnerable if rates or borrowing needs rise
• Retained earnings deficit (-12.16) limiting capital policy flexibility

Key Concerns:

• Internal inconsistency in reported ordinary income (1.56) vs operating loss and small net non-operating income
• Sustained SG&A burden (5.91) exceeding gross profit (4.42)
• Low asset turnover (0.362) constraining ROE without margin improvement
• Data gaps across SG&A and non-operating breakdowns limit transparency

Investment Implications

Key Takeaways:

• Topline grew 7.3% YoY, but operating income remained slightly negative; EBITDA barely positive
• Net income positive and ROE 6.0%, but quality is weak with OCF negative
• Cash of 22.74 and current ratio 433% provide ample liquidity buffer despite FCF burn
• Leverage modest (D/E 0.36x), but interest coverage is below threshold
• Path to sustainable profitability requires SG&A discipline and better cash conversion

Metrics to Watch:

• OCF/Net Income (target >1.0) and Free Cash Flow trajectory
• SG&A growth vs revenue growth to gauge operating leverage
• Operating margin progression from -0.4% toward sustained positive territory
• Cash balance and runway vs planned capex and investing outflows
• Receivables and working capital movements relative to revenue
• Clarification of ordinary income drivers and any one-off/non-operating items

Relative Positioning: Relative to small-cap peers in early commercialization stages, the company shows decent gross margins and strong liquidity, but lags on operating leverage and cash conversion; financial risk is cushioned by cash, yet earnings quality and scale remain the key overhangs.

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