People, Dreams & Technologies Group Co.,Ltd. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥45.98B
• Operating Income: ¥2.68B
• Net Income: ¥448M
• EPS: ¥176.75

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

Hito-Yume-Gijutsu Group Co., Ltd. (92480) delivered solid topline growth in FY2025 with revenue of ¥45.984bn, up 15.5% YoY, and strong operating leverage, as operating income rose 49.9% YoY to ¥2.683bn. Profitability improved at the operating level, with an EBITDA of ¥3.176bn (6.9% margin) and operating margin of roughly 5.8%, supported by disciplined cost control and scale benefits. Gross profit was reported at ¥11.244bn, implying a gross margin of 24.5%; however, the provided cost of sales figure does not reconcile with the reported gross profit, indicating a disclosure classification difference rather than a data error. Ordinary income of ¥2.708bn exceeded operating income slightly, suggesting modest positive non-operating contributions even after ¥93m of interest expense. Despite operating strength, net income declined 21.0% YoY to ¥1.564bn, indicating below-the-line factors (e.g., taxes or special items) offset operating gains. The calculated effective tax burden appears closer to c.30% (¥819m tax expense on approximately ¥2.7bn pre-tax), notwithstanding the provided “effective tax rate 0.0%” metric, which should be treated as unreported rather than zero. DuPont decomposition shows ROE at 7.48% (net margin 3.40%, asset turnover 1.118x, leverage 1.97x), an acceptable return profile that improved at the operating level but was capped by lower net margin. Liquidity is robust with a current ratio of 221% and working capital of ¥13.963bn, supported by sizable current assets of ¥25.515bn. Solvency appears moderate with a debt-to-equity ratio of 0.82x and strong interest coverage of 28.8x, indicating manageable financial risk at current earnings levels. Operating cash flow was negative at -¥1.142bn, leading to negative free cash flow of -¥1.777bn after ¥635m of investing outflows, suggesting a working capital build or timing effects despite higher earnings. Financing inflows of ¥1.036bn partially bridged the FCF shortfall, implying reliance on external funding in the period. Equity reported at ¥20.912bn and assets at ¥41.145bn align with the DuPont financial leverage (1.97x), although total liabilities reported (¥17.164bn) do not fully reconcile to assets; this likely reflects classification differences in the disclosed data. The company reported no dividend (DPS ¥0.00), with payout ratio 0% and FCF coverage not meaningful given negative FCF. Overall, the quarter demonstrates healthy revenue growth and operating momentum, but weaker net income, negative operating cash flow, and reliance on financing highlight a need to improve cash conversion. The balance sheet is liquid and interest coverage is strong, providing a buffer to navigate cash flow variability. Data limitations (zeros indicating unreported items and some cross-statement inconsistencies) require caution in interpretation, but the available non-zero metrics support the observed trends.

Profitability Analysis

ROE is 7.48% via DuPont (net margin 3.40% × asset turnover 1.118 × financial leverage 1.97). Net margin at 3.40% is modest for the business mix, with pressure below operating income level evident in the 21% YoY decline in net income despite a 49.9% YoY increase in operating income. Operating margin is approximately 5.8% (¥2.683bn / ¥45.984bn), reflecting operating leverage from 15.5% revenue growth. EBITDA margin at 6.9% indicates limited D&A intensity (D&A ¥493m), consistent with a service-heavy model. Interest burden is light (interest expense ¥93m; coverage 28.8x), and ordinary income slightly exceeds operating income, suggesting small positive non-operating items. Reported gross margin is 24.5%; the discrepancy between reported cost of sales and gross profit likely stems from classification and should be interpreted using the reported gross profit. Margin quality: the spread between operating margin (~5.8%) and net margin (3.40%) reflects tax and possibly non-recurring or below-the-line items; the calculated tax burden (~30%) largely explains the compression. Operating leverage appears favorable as revenue growth translated to outsized operating income growth, implying fixed-cost dilution or improved mix.

Growth Assessment

Revenue grew 15.5% YoY to ¥45.984bn, indicating solid demand and/or share gains. Operating income expanded 49.9% YoY to ¥2.683bn, demonstrating strong incremental margins and effective cost management. Ordinary income of ¥2.708bn corroborates the operating improvement with minimal drag from financing costs. Net income declined 21.0% YoY to ¥1.564bn, implying non-operating or tax effects offset operational gains; the implied tax rate (~30%) versus last year may be a driver. Profit quality is mixed: operating metrics improved, but negative OCF (¥-1.142bn) and FCF (¥-1.777bn) indicate cash conversion lagged earnings, likely due to working capital investment. Sustainability: if revenue growth persists and working capital normalizes, earnings growth should translate better to cash; otherwise, cash flow could remain a governor on growth. Outlook considerations (inferred): monitor order visibility/backlog, client activity levels, and pricing power to sustain mid-teens revenue growth; watch hiring/productivity and SG&A discipline to retain operating leverage. Given limited disclosure on segment mix and backlog, forward growth commentary is constrained by data availability.

Financial Health

Liquidity is strong: current assets ¥25.515bn vs current liabilities ¥11.552bn (current ratio 221%) and working capital of ¥13.963bn. Quick ratio equals current ratio due to inventory shown as unreported; actual quick ratio may be slightly lower if inventories exist. Solvency appears moderate: debt-to-equity is 0.82x, and interest coverage is high at 28.8x, indicating ample capacity to service debt at current earnings. Capital structure leverage from DuPont (assets/equity) is 1.97x, consistent with a balanced use of debt and equity. The equity ratio is displayed as 0.0% but should be treated as unreported; based on assets and equity, the implied equity ratio is approximately 50.8% (¥20.912bn/¥41.145bn). Some balance sheet items (total liabilities vs assets plus equity) do not fully reconcile, suggesting classification or disclosure gaps in the dataset; conclusions are therefore based on the provided ratios and DuPont leverage rather than a strict A=L+E check.

Cash Flow Quality

Earnings quality is mixed: operating profit and EBITDA improved, but operating cash flow was negative at ¥-1.142bn, yielding an OCF/net income ratio of -0.73. Free cash flow was -¥1.777bn after ¥635m of investing outflows, indicating that earnings did not convert to cash this period. The negative OCF likely reflects working capital outflows (e.g., receivables build or timing of payables) common in growth phases; however, absent detailed working capital breakdowns, the exact driver is unknown. Financing inflows of ¥1.036bn partially offset the FCF deficit, implying reliance on debt or equity funding to support growth and cash needs. Depreciation at ¥493m is modest relative to EBITDA, indicating limited non-cash earnings inflation from D&A. Sustained improvement in cash conversion will be key to validating earnings quality; watch the trajectory of OCF in relation to operating income as revenue growth normalizes.

Dividend Sustainability

Annual DPS was ¥0.00 with a payout ratio of 0.0%, indicating no dividend distribution. Given negative FCF (-¥1.777bn) and negative OCF (-¥1.142bn), the absence of a dividend aligns with internal funding needs for growth and working capital. FCF coverage of dividends is not applicable (0.00x reported) but would be inadequate if a dividend were in place. Policy outlook: with operating momentum but weak cash conversion, management is likely to prioritize reinvestment and balance sheet flexibility over distributions. Future dividend capacity will depend on normalizing working capital and sustained positive OCF; leverage metrics (0.82x D/E and 28.8x interest coverage) provide room, but consistent FCF is a prerequisite for a sustainable payout.

Risk Assessment

Business Risks:

• Revenue growth normalization risk after a strong +15.5% YoY period
• Pricing pressure and mix shifts compressing the 24.5% reported gross margin
• Execution risk in scaling operations while maintaining ~5.8% operating margin
• Client concentration or project timing risk affecting cash receipts and OCF
• Talent availability and wage inflation impacting delivery capacity and margins

Financial Risks:

• Negative operating cash flow and FCF requiring continued external financing
• Working capital volatility leading to cash conversion shortfalls
• Potential increase in interest costs from higher rates despite current 28.8x coverage
• Data classification inconsistencies that could mask liabilities or off-balance items
• Tax rate volatility affecting net margin (implied ~30% in FY2025)

Key Concerns:

• Divergence between strong operating income growth (+49.9% YoY) and net income decline (-21.0% YoY)
• Negative OCF (-¥1.142bn) and FCF (-¥1.777bn) despite EBITDA growth
• Balance sheet reconciliation gaps; reliance on provided leverage ratios for inference

Investment Implications

Key Takeaways:

• Healthy topline growth (+15.5% YoY) with clear operating leverage (OI +49.9% YoY)
• Net margin compression to 3.40% driven primarily by tax and below-the-line impacts
• Cash conversion is the weak link: OCF/NI at -0.73 and FCF negative
• Strong liquidity (current ratio 221%) and robust interest coverage (28.8x) mitigate near-term risk
• Moderate leverage (D/E 0.82x; financial leverage 1.97x) leaves flexibility if cash flow normalizes

Metrics to Watch:

• Operating cash flow trajectory and OCF/NI moving toward >1.0
• Working capital days (DSO/DPO) and receivables collection trends
• Sustained operating margin at or above ~6% amid growth
• Net margin recovery toward operating levels through tax/one-off normalization
• Debt levels versus EBITDA and maintenance of >15x interest coverage
• Reconciliation of reported cost of sales and liabilities in subsequent disclosures

Relative Positioning: Within domestic service/engineering-oriented peers, the company shows above-average revenue growth and strong operating leverage, balanced by weaker cash conversion and lower net margin quality; balance sheet liquidity and coverage are supportive relative to peers, provided working capital normalizes.

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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