ProjectHoldings,Inc. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥4.03B
• Operating Income: ¥66M
• Net Income: ¥-17M
• EPS: ¥9.62

Income Statement

Balance Sheet

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

Project Holdings Co., Ltd. (TSE: 9246) reported FY2025 Q3 consolidated results under JGAAP with modest top-line growth and stable but slim profitability. Revenue was ¥4,033m (+2.8% YoY), while operating income was ¥66m (flat YoY), indicating limited operating leverage and some margin pressure in SG&A. Gross profit was ¥1,286.5m, implying a healthy gross margin of 31.9%, yet the operating margin was only 1.6%, highlighting a wide gap between gross and operating profitability. Ordinary income was ¥59m and net income ¥51m, yielding a net margin of 1.26%, consistent with the reported DuPont net margin. The reported DuPont framework shows ROE at 2.34%, driven by a low net margin (1.26%), moderate asset turnover (0.84x), and leverage of 2.20x. Balance sheet strength appears solid: current assets of ¥3,683.1m versus current liabilities of ¥1,496.0m produce a current ratio of 2.46x and working capital of ¥2,187.1m. Although the equity ratio is shown as 0.0% in the dataset, that figure reflects non-disclosure rather than zero; based on provided totals, equity/asset ratio is approximately 45.4% (¥2,183m/¥4,804m). Interest expense was ¥16.7m, with EBIT-based interest coverage around 3.9–4.0x, adequate but with limited cushion given tight operating margins. The effective tax rate appears 0.0% due to a small tax benefit (negative tax expense), which may not recur. Cash flow line items (OCF, ICF, FCF, cash) are shown as zero, indicating non-disclosure rather than true zeros; therefore, cash flow quality and liquidity buffer cannot be directly assessed from this dataset. Dividend per share is reported as ¥0, consistent with a conservative stance while margins remain thin; payout and FCF coverage ratios appear as zero due to non-disclosure of cash flows and zero DPS. Overall, the company demonstrates resilient revenue with constrained profit conversion, conservative balance sheet liquidity, and manageable leverage. The key near-term focus is on improving operating efficiency to translate gross margin into operating profit, while preserving liquidity and coverage. Data limitations, particularly the absence of cash flow disclosures and share count details, constrain deeper inference on earnings quality and capital allocation. Given these constraints, conclusions emphasize observable ratios and margins while flagging areas for further verification in the full quarterly report and supplementary materials.

Profitability Analysis

ROE_decomposition: ROE 2.34% = Net Profit Margin 1.26% × Asset Turnover 0.84× × Financial Leverage 2.20×. The low ROE is primarily driven by the modest net margin; turnover and leverage are within typical ranges for service-oriented businesses. margin_quality: Gross margin at 31.9% (¥1,286.5m/¥4,033m) is solid, but the operating margin is only 1.6% (¥66m/¥4,033m), indicating substantial SG&A absorption. Ordinary margin is 1.46% and net margin 1.26%, showing further attrition from financing costs and a small tax benefit this quarter. operating_leverage: Revenue grew +2.8% YoY while operating income was flat, implying low or negative operating leverage in the period (cost growth roughly offset revenue growth). To expand margins, the company needs tighter SG&A control or higher gross margin mix.

Growth Assessment

revenue_sustainability: Top-line growth of +2.8% YoY suggests stable demand with limited acceleration. Without order/backlog data, sustainability beyond the quarter cannot be confirmed. profit_quality: Flat operating income despite higher revenue points to cost pressure. Net income benefited from a negative tax expense (¥-3.4m), which may not be recurring. outlook: Near-term profit trajectory hinges on cost discipline and mix improvements to convert gross profit into operating earnings. External indicators to monitor include order intake, utilization rates, and pricing power. Data constraints (no OCF/FCF reported) limit visibility into underlying momentum.

Financial Health

liquidity: Current assets ¥3,683.1m vs. current liabilities ¥1,496.0m yields a current ratio of 2.46x and working capital of ¥2,187.1m, indicating strong short-term coverage. Quick ratio is shown as 2.46x due to inventories being undisclosed (reported as zero). Cash balance is not disclosed, so immediate liquidity buffer cannot be verified. solvency: Total liabilities ¥3,298.5m vs. equity ¥2,183.0m implies debt-to-equity of 1.51x. Computed equity ratio is ~45.4% (vs. 0.0% placeholder in the dataset). Interest coverage is ~3.9x (EBIT ¥66m / interest ¥16.7m), adequate but leaves limited cushion if earnings soften. capital_structure: Leverage (assets/equity) at 2.20x supports modest ROE given thin margins. Financing costs are meaningful relative to EBIT, so deleveraging or earnings expansion would improve coverage.

Cash Flow Quality

earnings_quality: OCF and FCF are undisclosed (shown as zero), preventing reconciliation of earnings to cash. The negative tax expense suggests some non-cash/timing effects in the quarter. FCF_analysis: Free cash flow cannot be evaluated due to missing OCF and capex data. Depreciation is shown as zero (likely undisclosed), so EBITDA and cash conversion metrics cannot be reliably computed. working_capital: Working capital is ample (¥2,187.1m). However, without OCF detail (changes in receivables/payables), we cannot assess whether revenue growth is driving cash consumption or generation.

Dividend Sustainability

payout_ratio_assessment: DPS is ¥0 and payout ratio shows as 0%, consistent with retaining earnings amid slim operating margins. EPS is ¥9.62 but share count is undisclosed, so aggregate payout analysis is limited. FCF_coverage: Not assessable due to undisclosed OCF and capex (FCF shows as zero placeholder). policy_outlook: Given low ROE (2.34%) and thin margins, maintaining a conservative dividend stance appears prudent until consistent cash generation and margin expansion are demonstrated.

Risk Assessment

Business Risks:

• Thin operating margins leave limited buffer against cost inflation or pricing pressure
• Execution risk on cost control and project delivery impacting margin realization
• Potential client concentration or project timing risk typical of project-based service models
• Macroeconomic slowdown reducing discretionary project spend
• Human capital constraints (recruitment/retention) affecting utilization and delivery

Financial Risks:

• Moderate leverage with limited interest coverage (~3.9x) heightens sensitivity to earnings volatility
• Cash flow visibility is low due to undisclosed OCF/FCF; liquidity buffer cannot be verified
• Negative tax expense this quarter may reverse, affecting bottom-line stability
• Refinancing risk if interest rates rise or credit conditions tighten

Key Concerns:

• Operating leverage is weak: revenue growth not translating into higher operating profit
• Dependence on SG&A discipline to sustain profitability at current margin levels
• Incomplete disclosure on cash flows and cash position constrains assessment of earnings quality

Investment Implications

Key Takeaways:

• Revenue growth of +2.8% YoY with flat operating income signals margin pressure
• Gross margin is solid at 31.9%, but SG&A absorption limits operating margin to 1.6%
• ROE of 2.34% is hampered by low net margin; asset turnover and leverage are acceptable
• Liquidity appears strong (current ratio 2.46x), equity ratio ~45.4% by calculation
• Interest coverage ~3.9x is adequate but sensitive to earnings fluctuations
• Cash flow and cash balance are undisclosed; further disclosure is needed to assess cash conversion

Metrics to Watch:

• Operating margin progression and SG&A-to-sales ratio
• Order intake/backlog and utilization rates to gauge forward revenue visibility
• OCF/Net income and working capital turns once cash flow data is available
• Interest coverage and effective tax rate normalization
• Equity ratio and net debt once cash and debt details are disclosed

Relative Positioning: Based on available data, the company exhibits average top-line growth with below-average profitability and adequate balance sheet strength. Visibility on cash generation is limited due to undisclosed cash flow data, which tempers confidence in comparing quality of earnings versus peers.

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