Japan Ecosystem Co.,Ltd. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥11.26B
• Operating Income: ¥437M
• Net Income: ¥341M
• EPS: ¥34.71

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

日本エコシステム株式会社 (92490) reported FY2025 Q4 (full-year) results under JGAAP on a consolidated basis showing strong top-line momentum but pronounced margin compression. Revenue grew 21.1% YoY to ¥11,261 million, yet operating income fell 42.5% to ¥437 million and net income declined 51.3% to ¥301 million, indicating negative operating leverage. Gross profit was ¥2,562 million with a gross margin of 22.8%, while the operating margin compressed to 3.9%, reflecting higher SG&A, mix effects, or project cost inflation. Ordinary income of ¥468 million exceeded operating income, aided by non-operating gains exceeding interest expense of ¥10.8 million, which left interest coverage a healthy 40.5x. Net profit margin settled at 2.67%, driving a calculated ROE of 5.3% via DuPont (NPM 2.67% x asset turnover 0.809 x financial leverage 2.45). Asset turnover of 0.81x suggests moderate efficiency relative to an asset-intensive model, while financial leverage at 2.45x is supportive but not aggressive. Operating cash flow was robust at ¥640 million, 2.13x net income, indicating earnings quality supported by cash conversion and/or favorable working capital timing. However, heavy investing outflows of ¥4,492 million led to negative free cash flow of ¥3,852 million, largely financed by ¥3,474 million of financing inflows, pointing to a growth or capacity build phase. The balance sheet shows total assets of ¥13,921 million and total liabilities of ¥3,786 million, with reported equity of ¥5,676 million; some balance sheet components are undisclosed, so full capital structure reconciliation is not possible from the provided items. Liquidity appears adequate with a current ratio of 1.42x and quick ratio of 1.27x, supported by positive working capital of ¥960 million. The reported debt-to-equity ratio of 0.67x suggests moderate leverage consistent with the strong interest coverage. Dividend per share is reported at ¥0.00 and payout ratio at 0.0%; given disclosure conventions, these may reflect non-disclosure rather than actual zero, so dividend policy cannot be conclusively inferred from this dataset. EPS was ¥34.71; share count and book value per share are not disclosed, limiting per-share valuation diagnostics. Overall, the company is balancing rapid growth with pressure on profitability and heavy investment; sustaining cash generation while restoring margins will be key to improving ROE and funding growth without undue reliance on external capital. Data limitations (zeros indicating unreported items) constrain deeper granularity on equity ratio, cash balances, and share base, but the available figures allow a coherent view of growth investment, margin pressure, and adequate solvency.

Profitability Analysis

ROE_decomposition: DuPont ROE = 5.30% = Net Margin (2.67%) x Asset Turnover (0.809x) x Financial Leverage (2.45x). The primary drag in FY2025 is the compressed net margin, while turnover and leverage are stable contributors. margin_quality: Gross margin is 22.8% (¥2,562m GP on ¥11,261m revenue). Operating margin is 3.9% (¥437m OI), down sharply YoY as OI fell 42.5% despite 21.1% revenue growth, implying higher SG&A intensity and/or weaker project/unit economics. Ordinary income (¥468m) exceeded OI, suggesting positive non-operating contributions offsetting low financing costs. Net margin at 2.67% reflects the cumulative pressure of operating costs and taxes. operating_leverage: Negative operating leverage evident: +21.1% revenue vs -42.5% operating income. This indicates fixed-cost absorption challenges and/or elevated variable costs. EBITDA of ¥768m (6.8% margin) provides cushion but remains modest versus sales, leaving limited room to absorb further cost inflation without pricing power.

Growth Assessment

revenue_sustainability: Top-line expanded 21.1% YoY to ¥11.26bn, indicating healthy demand or footprint expansion. Sustainability will depend on backlog conversion, order intake quality, and retention of pricing power amid cost pass-through dynamics. profit_quality: Despite revenue growth, profit contraction (NI -51.3%) indicates growth at reduced incremental margins. The OCF/NI ratio of 2.13x supports the cash realization of earnings, but heavy capex/investment masked at the FCF level suggests a transition phase where near-term profitability is traded for capacity/strategic positioning. outlook: To stabilize earnings, management likely needs to normalize gross margin via mix/pricing and rein in SG&A intensity as growth scales. If recent investments (¥4.49bn outflows) begin to contribute, operating leverage could turn positive in subsequent periods; until then, margin restoration is the primary swing factor for ROE.

Financial Health

liquidity: Current ratio 141.8% and quick ratio 127.2% reflect adequate short-term liquidity with working capital of ¥960m. Inventories at ¥337m are manageable relative to sales, reducing stock obsolescence risk. solvency: Debt-to-equity of 0.67x and interest coverage of 40.5x indicate moderate leverage and strong debt service capacity. Financial leverage of 2.45x in DuPont terms is supportive of ROE without appearing overstretched. capital_structure: Total assets ¥13,921m; liabilities ¥3,786m; reported equity ¥5,676m. Some balance sheet items are undisclosed (e.g., detailed debt mix, cash), limiting full reconciliation and precise net debt analysis. Nonetheless, leverage metrics provided suggest a balanced structure with capacity contingent on investment ramp outcomes.

Cash Flow Quality

earnings_quality: OCF/Net Income at 2.13x (¥640m/¥301m) indicates strong cash conversion, potentially aided by favorable working capital movements or customer advances. FCF_analysis: Free cash flow was -¥3,852m due to significant investing outflows of -¥4,492m, characteristic of capacity expansion, M&A, or strategic projects. Financing inflows of ¥3,474m predominantly backfilled the FCF deficit. working_capital: With current assets ¥3,256m and current liabilities ¥2,295m, the company maintains positive working capital. Exact drivers (receivables, payables, contract liabilities) are not disclosed, but cash conversion appears supportive in FY2025 given OCF strength despite profit compression.

Dividend Sustainability

payout_ratio_assessment: Reported DPS and payout ratio are 0.00, which likely reflect non-disclosure rather than an actual zero. Based on EPS of ¥34.71, an actual payout (if any) is not provided, so a payout ratio cannot be reliably computed. FCF_coverage: With FCF at -¥3,852m in FY2025, any hypothetical dividend would not be covered by free cash flow this period, given the investment-heavy cash profile. policy_outlook: Given growth investments and margin restoration priorities, financial flexibility may take precedence over cash returns in the near term. Absent explicit guidance, dividend policy remains unclear from the provided data.

Risk Assessment

Business Risks:

• Margin pressure from input cost inflation and/or unfavorable sales mix reducing gross and operating margins.
• Execution risk on large investment program (¥4.49bn investing outflow) with uncertain ramp timing and returns.
• Negative operating leverage if SG&A grows faster than revenue or pricing power is limited.
• Project timing and backlog conversion risk affecting quarterly cash flows.
• Competitive intensity potentially constraining price pass-through.

Financial Risks:

• Reliance on external financing (¥3.47bn inflow) to fund negative FCF, increasing exposure to funding markets.
• Potential net debt increase not quantifiable due to undisclosed cash balance, limiting visibility on net leverage.
• Sensitivity of coverage to profit volatility; current 40.5x is strong but could compress if margins do not recover.
• Working capital swings could pressure OCF in a growth phase.

Key Concerns:

• Sharp YoY decline in operating and net income despite strong revenue growth.
• Large, investment-driven negative FCF in FY2025.
• Data gaps (cash, equity ratio detail, share count) limiting precision on per-share and net leverage analysis.

Investment Implications

Key Takeaways:

• Top-line growth is robust (+21.1% YoY), but profitability deteriorated materially (OI -42.5%, NI -51.3%).
• ROE at 5.3% is chiefly constrained by low net margin; turnover and leverage are acceptable.
• Strong cash conversion (OCF/NI 2.13x) offsets some earnings pressure, but heavy investment drove negative FCF.
• Liquidity and coverage are adequate (current ratio 1.42x; interest coverage 40.5x), supporting near-term solvency.
• Capital deployment effectiveness will be the key determinant of margin recovery and future ROE.

Metrics to Watch:

• Gross margin and operating margin trajectory (cost pass-through, mix).
• SG&A-to-sales ratio for evidence of operating leverage.
• Order intake/backlog and book-to-bill to gauge sustainability of revenue growth.
• OCF/EBITDA and working capital days (receivables, payables, inventory).
• Net debt/EBITDA and interest coverage as investments ramp.
• Capex/investment returns (ROIC vs WACC) and timing of contribution.

Relative Positioning: Within a growth-investing peer set, the company shows stronger revenue momentum but weaker near-term margins; leverage is moderate with solid coverage, placing it in a mid-risk, execution-dependent quadrant pending returns on recent investments.

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