YCP Holdings (Global) Limited FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥10.78B
• Operating Income: ¥709M
• Net Income: ¥332M
• EPS: ¥13.43

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

Verdict: A mixed quarter—solid top-line growth and a sharp rebound in operating profit, but net income fell on heavier non-operating and tax/minority drags. Revenue rose to 107.80 (100M JPY), up 13.0% YoY, indicating healthy demand and/or improved project throughput. Operating income surged to 7.09 (100M JPY), +97.0% YoY, reflecting operating leverage and likely better cost discipline or mix. Operating margin improved to about 6.6% (7.09/107.80), up roughly 281 bps versus an estimated ~3.8% in the prior period. Profit before tax was 6.20 (100M JPY), implying net non-operating losses of approximately 0.89 (100M JPY) relative to operating income. Net income declined to 2.99 (100M JPY), -27.8% YoY, translating to a net margin of about 2.8%. The YoY drop in net income despite operating strength suggests higher non-operating expenses and/or a higher tax/minority burden; the implied combined tax/minority rate is about 52% of PBT. ROE is modest at 2.1%, constrained by a thin net margin and conservative leverage (financial leverage ~1.55x). Asset turnover is 0.493x, typical for an advisory/principal investment model, but not enough to offset low margins. Reported ROIC is 3.5%, below the 5% warning threshold and far from a 7–8% best-practice target. Balance sheet looks conservative with an equity ratio of ~63.7–64.7%, suggesting capacity to invest for growth or return capital, pending cash flow visibility. Earnings quality cannot be assessed due to unreported operating cash flow; this is a key limitation. EPS (basic) was 13.43 JPY, consistent with reported net income and average shares. Forward-looking, sustaining the operating margin expansion while reducing non-operating drags and normalizing the effective tax/minority rate will be essential to lift ROE/ROIC. Near-term priorities should include converting earnings to cash, improving ROIC above 5%, and clarifying dividend/capital allocation policy given the strong equity base.

Profitability Analysis

ROE decomposition: Net Profit Margin ~2.8% × Asset Turnover ~0.493 × Financial Leverage ~1.55x = ROE ~2.1% (matches reported). The biggest driver of change this quarter is the net profit margin: despite operating margin expansion (~281 bps YoY to ~6.6%), the net margin compressed versus last year (~4.3% prior to ~2.8% now) due to non-operating losses and a higher effective tax/minority drag. Business context: the advisory/principal investment mix typically produces volatile non-operating line items (investment-related gains/losses, FX, fair value changes) and variable tax/minority effects by geography and project structure. Sustainability: operating margin gains appear more structural (scale benefits, mix, cost control), but the non-operating and tax/minority headwinds may prove transient if driven by valuation movements or timing; visibility remains low given disclosures. Operating leverage is evident: revenue +13% YoY vs operating income +97% YoY. Watch for any reversal if SG&A growth re-accelerates; SG&A details were not disclosed, limiting a deeper diagnostic.

Growth Assessment

Top-line growth of +13.0% YoY to 107.80 (100M JPY) indicates solid client demand and/or successful expansion in key practices or geographies. The near-100% YoY rise in operating income signals robust operating leverage and potential mix improvements. However, the translation to bottom line is weak: net income fell 27.8% YoY, with net margin down to ~2.8% from ~4.3% last year, highlighting sensitivity to non-operating/tax/minority items. Revenue sustainability depends on project pipeline, utilization, and retention; none were disclosed, so visibility is moderate. With ROIC at 3.5%, incremental growth should prioritize higher-return initiatives and disciplined capital deployment. Outlook hinges on stabilizing non-operating items and optimizing the tax structure; absent that, earnings growth may lag operating performance.

Financial Health

Total assets are 218.53 (100M JPY) and equity is 141.27 (100M JPY), implying an equity ratio of ~64% and financial leverage of ~1.55x—conservative. This suggests low solvency risk and potential capacity for investment or capital returns. Current ratio, quick ratio, and interest-bearing debt are unreported, so we cannot assess short-term liquidity or maturity mismatches; no explicit warnings triggered. No off-balance sheet obligations were disclosed. Given the strong equity base, the balance sheet can likely absorb volatility in non-operating items, but confirmation of cash and debt levels is needed.

Cash Flow Quality

Operating cash flow was not disclosed, so we cannot compute OCF/Net Income or evaluate cash conversion; this is a key limitation. Free cash flow and capex were also unreported, preventing assessment of sustainability for dividends or growth investments. Working capital movements are unknown; no signs of manipulation can be inferred from the available data. Given the divergence between operating profit growth and net income decline, triangulating cash flows in the next filing is critical to judge earnings quality.

Dividend Sustainability

Dividend data (DPS, total dividends, payout ratio) were not disclosed. With ROE at 2.1% and ROIC at 3.5%, distribution capacity should be calibrated against cash generation and growth needs. The strong equity ratio suggests balance sheet capacity, but absent OCF/FCF data, we cannot evaluate coverage. Policy clarity and medium-term capital allocation targets would help assess sustainability.

Risk Assessment

Business Risks:

• Revenue volatility from project-based advisory and principal investment activities.
• Client concentration and utilization risk typical of consulting-led business models.
• Talent retention and wage inflation pressures impacting operating margin.
• Execution risk in scaling new practices/geographies without diluting ROIC.

Financial Risks:

• Low ROIC (3.5%) below the 5% warning threshold, risking value dilution if sustained.
• Exposure to non-operating income/expense volatility (investment valuations, FX) that can decouple NI from operating trends.
• Potentially elevated effective tax/minority burden (~52% of PBT implied), depressing net margins.
• Data gaps (OCF, debt, liquidity metrics) limit visibility on cash and refinancing risk.

Key Concerns:

• Net income decline (-27.8% YoY) despite strong operating profit, driven by non-operating and tax/minority effects.
• ROE remains low at 2.1% despite margin improvements at the operating level.
• Inability to validate earnings quality due to absent cash flow disclosure.
• Need to lift ROIC above 5% to meet a basic hurdle and toward 7–8% best-practice.

Investment Implications

Key Takeaways:

• Healthy revenue growth (+13% YoY) with significant operating leverage (+97% YoY OI).
• Operating margin expanded to ~6.6%, but net margin compressed to ~2.8%.
• Non-operating losses and a high tax/minority impact (~52% of PBT) are the main earnings drags.
• ROE at 2.1% and ROIC at 3.5% indicate capital efficiency remains below targets.
• Equity ratio ~64% provides balance sheet strength and optionality pending cash flow clarity.

Metrics to Watch:

• Operating cash flow/Net income ratio (target >1.0 for quality).
• Effective tax rate and minority interests as a percent of PBT.
• Non-operating gains/losses (investment valuations, FX).
• Operating margin sustainability and utilization rates.
• ROIC progression toward >5% near-term and 7–8% medium-term.
• Order backlog/pipeline disclosures, if provided.

Relative Positioning: Operational momentum is improving versus peers with similar advisory models, but capital efficiency (ROIC/ROE) and earnings translation to the bottom line lag; balance sheet strength is a relative positive pending confirmation of cash flow.

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