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

Green Earth Institute (single-entity, JGAAP) delivered FY2025 Q4 results featuring modest topline expansion and positive bottom-line profitability driven largely by non-operating items. Revenue rose 7.3% YoY to ¥1,075m, with gross profit of ¥441.8m and a solid gross margin of 41.1%, indicating healthy unit economics at the gross level. Operating income remained slightly negative at ¥-4m, implying an operating margin of approximately -0.4% and essentially flat YoY performance. Despite this, ordinary income reached ¥156m and net income ¥127m (up 15.3% YoY), highlighting the significance of non-operating gains in the earnings mix. The DuPont-based ROE is 6.03%, consistent with the reported figure, supported by a net margin of 11.81%, asset turnover of 0.362x, and modest leverage of 1.41x. EBITDA was ¥10.7m with a low 1.0% margin, underscoring limited operating leverage at current scale. Liquidity appears strong with a current ratio of 433% and working capital of ¥2,027.5m, while solvency looks conservative with a debt-to-equity ratio of 0.36x. Cash conversion is weak: operating cash flow was ¥-49m against net income of ¥127m (OCF/NI of -0.39), and FCF was negative at ¥-205m on continued investment outflows of ¥-156m. Interest expense was modest at ¥2.0m, but the reported interest coverage ratio of -2.0x (based on negative EBIT) signals that core operations alone are not covering financing costs. The effective tax burden appears low given reported income tax of ¥2.3m versus positive earnings, consistent with the stated effective tax rate metric of 0.0%, suggesting the use of tax credits or specific incentive structures. Balance sheet strength provides runway, but cash and equivalents are not disclosed (0 reflects unreported items), which limits visibility into immediate liquidity headroom. The sustainability of earnings hinges on improving operating profit and reducing reliance on non-operating income to support net profit. The absence of dividends (DPS ¥0, payout 0%) is consistent with reinvestment in growth and the current operating loss position. Overall, the company shows improving net profitability year over year, robust gross margins, and strong balance sheet ratios, but needs to translate revenue growth into durable operating income and better cash flow conversion. Data limitations include unreported cash, inventories, equity ratio, and share data; analysis focuses strictly on available non-zero disclosures.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: 11.81%
• asset_turnover: 0.362
• financial_leverage: 1.41
• calculated_ROE: 6.03%
• commentary: ROE of 6.03% is primarily supported by non-operating driven net margin, while low asset turnover and modest leverage cap return amplification. margin_quality: Gross margin of 41.1% is solid, indicating favorable pricing/mix or cost pass-through. Operating margin is -0.4%, pointing to elevated SG&A/R&D relative to scale. Ordinary margin (~14.5%) and net margin (11.81%) rely on non-operating gains; earnings quality at the operating level remains weak. operating_leverage: EBITDA margin is 1.0% and EBIT is negative, suggesting limited operating leverage currently. Incremental revenue growth is not yet translating into operating profit expansion; further scale or cost discipline is required to cross a clearer breakeven threshold.

Growth Assessment

revenue_sustainability: Revenue grew 7.3% YoY to ¥1,075m. Gross margin stability at 41.1% implies product/service-level economics are intact. The lack of inventory data (unreported) limits insights into backlog/build; growth appears organic but its durability depends on maintaining project flow and customer demand. profit_quality: Net income growth of 15.3% YoY occurred despite negative operating income, indicating material non-operating contributions. Earnings quality is therefore mixed: strong at the gross level, but weak at the operating level. outlook: To sustain profit growth, the company must convert gross profit to positive operating profit via scale and cost control. With modest leverage and strong working capital, there is capacity to invest; however, negative OCF and FCF suggest near-term growth could continue to require funding from the balance sheet or external sources.

Financial Health

liquidity: Current assets ¥2,636.1m vs current liabilities ¥608.6m yields a current ratio of 433% and quick ratio of 433% (inventories unreported). Working capital is ¥2,027.5m, indicating substantial short-term buffer. Cash and equivalents are unreported, which constrains precise liquidity assessment. solvency: Total liabilities ¥761.2m and total equity ¥2,106.0m result in a debt-to-equity ratio of 0.36x and leverage (assets/equity) of 1.41x. This is a conservative capital structure with ample equity cushion. capital_structure: Low financial leverage reduces distress risk but also limits ROE amplification. Interest expense is small at ¥2.0m; however, negative EBIT implies operating activities alone do not cover interest.

Cash Flow Quality

earnings_quality: OCF/Net Income is -0.39, indicating weak cash conversion and suggesting working capital outflows and/or significant non-cash/non-operating contributions to profit. EBITDA is positive but small (¥10.7m) relative to net income, highlighting the reliance on non-operating items. FCF_analysis: FCF of ¥-205m (OCF ¥-49m less investing CF ¥-156m) indicates cash burn after investments. Investment outflows appear meaningful relative to revenue (≈14.5% of sales), consistent with growth and capability build-out. working_capital: Working capital is sizable at ¥2,027.5m, but period cash movements indicate deployment into operations/investments. Without disclosed cash balances, it is difficult to assess duration of runway solely from liquid resources.

Dividend Sustainability

payout_ratio_assessment: No dividend (DPS ¥0; payout 0%), which is appropriate given negative operating income and negative FCF. FCF_coverage: FCF coverage of dividends is not applicable (0.00x), but negative FCF indicates dividends would not be covered by internally generated cash at present. policy_outlook: Given reinvestment needs, focus likely remains on funding growth and achieving consistent operating profitability before considering distributions.

Risk Assessment

Business Risks:

• Reliance on non-operating income to achieve net profitability
• Inability to convert gross profit into sustainable operating profit
• Potential customer/project concentration in early-stage or contract-driven business models
• Execution risk on scaling while controlling SG&A and R&D
• Regulatory and policy dependency if subsidies/grants are material
• Market adoption risk for technology/solutions tied to bio-based or sustainability domains

Financial Risks:

• Negative operating cash flow and negative FCF requiring balance sheet support
• Operating-level interest coverage shortfall due to negative EBIT
• Limited visibility on cash balances (unreported), constraining liquidity assessment
• Potential working capital volatility as business scales

Key Concerns:

• Earnings quality skewed toward non-operating items
• Persistent operating losses despite revenue growth
• Weak cash conversion (OCF/NI -0.39) and continued investment outflows

Investment Implications

Key Takeaways:

• Topline grew 7.3% YoY to ¥1,075m with strong 41.1% gross margin
• Operating income remains slightly negative at ¥-4m, keeping operating margin below breakeven
• Net income up 15.3% to ¥127m, but quality is non-operating driven
• ROE at 6.03% with modest leverage (1.41x) and low asset turnover (0.362x)
• Liquidity strong by ratios (current ratio 433%), though cash balance is unreported
• Cash flow conversion weak: OCF ¥-49m; FCF ¥-205m

Metrics to Watch:

• Operating margin progression and EBITDA margin expansion
• Breakdown of non-operating income vs recurring operating profit
• OCF/Net income and working capital turns
• Capex and R&D intensity vs revenue
• Cash and equivalents disclosure and burn rate
• Customer concentration and contract pipeline visibility

Relative Positioning: Within TSE growth/tech-oriented peers, the company demonstrates strong gross margins and conservative leverage but lags on operating profitability and cash generation; net profitability hinges more on non-operating items than on core operations.

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