GIFT HOLDINGS INC. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥35.88B
• Operating Income: ¥3.37B
• Net Income: ¥1.98B
• EPS: ¥109.34

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

Verdict: Solid top-line growth with modest margin compression and strong cash conversion, tempered by tight liquidity and capex-driven negative free cash flow. Revenue rose 26.0% YoY to 358.78, while operating income increased 15.8% YoY to 33.67 and net income grew 16.5% YoY to 21.85. Gross profit reached 239.55, translating to a robust gross margin of 66.8%. Operating margin is 9.4% (33.67/358.78), down approximately 82 bps from an estimated 10.2% a year ago. Net margin is 6.1%, compressing by about 50 bps from an estimated 6.6% last year. DuPont shows ROE at 21.1% driven by 6.1% net margin, 1.63x asset turnover, and 2.12x leverage, signaling healthy profitability despite margin pressure. Cash flow quality was strong with OCF at 40.89 (1.87x net income), indicating earnings are well supported by cash generation. However, FCF was negative at -14.44 due to sizeable capex of -51.92, consistent with expansion investments. Liquidity is a key watchpoint: current ratio is 0.71 and quick ratio is 0.63, resulting in negative working capital of -19.80. Leverage is moderate with D/E at 1.12x and interest coverage very strong at 87.7x, suggesting low near-term refinancing risk. Effective tax rate stands at 32.0%, broadly aligned with statutory levels. Reported XBRL ratios (e.g., operating margin at 0.1%) appear mapping-related and not reflective of the computed margins from the financials. Dividend payout appears conservative (calculated payout ratio 16.5%), but FCF coverage was -4.01x this period due to elevated investment. The combination of strong OCF and high ROE supports the medium-term equity story, but near-term cash demands from growth capex and sub-1.0 current ratio tighten the financial buffer. Looking ahead, continued store investments should sustain revenue momentum, but execution discipline on SG&A and working capital will be critical to stabilize margins and liquidity.

Profitability Analysis

ROE decomposition (DuPont): ROE 21.1% = Net Profit Margin 6.1% × Asset Turnover 1.630 × Financial Leverage 2.12x. The most notable change YoY appears in margins: operating margin compressed ~82 bps (to ~9.4%), and net margin compressed ~50 bps (to 6.1%), while asset turnover at 1.63x suggests efficient use of assets consistent with a scaled operator. The compression likely reflects growth investments and higher SG&A intensity relative to revenue, as operating income grew slower than revenue (15.8% vs 26.0%), indicating operating deleverage. This pressure is partly structural during expansion phases (pre-opening costs, onboarding, initial inefficiencies) and could normalize as new units mature, implying partial reversibility. Gross margin remains high at 66.8%, indicating pricing and mix remain supportive; the issue is primarily below gross profit. We cannot confirm SG&A growth vs revenue growth due to unreported SG&A breakdown, but the margin pattern implies SG&A grew faster than gross profit. Interest burden is minimal (interest expense 0.38; coverage 87.7x), so non-operating items did not drive ROE. Overall, ROE remains strong due to healthy turnover and moderate leverage, but sustaining it requires stabilizing operating margin as new capacity ramps.

Growth Assessment

Revenue growth of 26.0% YoY to 358.78 indicates strong demand and/or store network expansion. Operating income growth of 15.8% lagged sales, implying operating deleverage from elevated SG&A tied to expansion. Net income up 16.5% suggests non-operating items and tax rate were broadly neutral to slightly supportive. EBITDA was 45.45 (12.7% margin), providing ample capacity to fund operations, but capex-heavy investing drove negative FCF this year. The growth appears sustainable if new units ramp as expected and capex efficiency improves; however, near-term margin normalization is needed to convert growth to incremental profit. Given the large capex (-51.92), pipeline visibility seems robust, but timing and returns on these investments will dictate future EPS trajectory. Absent explicit R&D or SG&A detail, we infer growth is primarily footprint-driven rather than product-led. Outlook hinges on: maintaining traffic and ticket, controlling unit economics, and leveraging fixed costs as newly opened stores mature.

Financial Health

Liquidity: Current ratio 0.71 and quick ratio 0.63 indicate a tight liquidity position (warning threshold <1.0). Working capital is negative at -19.80, with current assets 48.47 vs current liabilities 68.28; this raises short-term funding risk if cash conversion slows. Cash and deposits total 24.30 against accounts payable of 11.86 and minimal short-term borrowings (0.05), but other current liabilities are sizable (details unreported). Solvency: Total liabilities 116.32 vs equity 103.80 yield a D/E ratio of 1.12x (within conservative thresholds <1.5x). Long-term loans are 41.16, and interest coverage is strong at 87.7x, indicating low refinancing stress under current rates. Maturity mismatch: The reliance on current liabilities over current assets suggests potential rollover risk; however, short-term interest-bearing debt is low, mitigating immediate cash interest exposure. Off-balance sheet: As a multi-unit operator, lease obligations (if classified as operating leases under JGAAP) may be material but are not disclosed here, potentially understating leverage.

Cash Flow Quality

Earnings quality is strong: OCF 40.89 vs net income 21.85 yields OCF/NI of 1.87x (>1.0 threshold). Working capital behavior is not fully disclosed, but the high OCF relative to NI suggests cash conversion from operations was robust rather than reliant on non-recurring items. Free cash flow was -14.44 due to significant capex (-51.92), consistent with expansion rather than maintenance spending. Dividend coverage from FCF is negative this year (FCF coverage -4.01x), implying dividends, if paid, were funded by cash reserves or financing amid growth investment. No clear signs of working capital manipulation are evident from available data; however, lack of period-over-period WC details limits detection of timing effects.

Dividend Sustainability

Calculated payout ratio is 16.5%, which is conservative against earnings capacity. However, FCF coverage is -4.01x this year due to heavy capex, implying dividends are not covered by free cash flow in the period. With strong OCF and modest interest burden, the company retains flexibility, but sustaining or growing dividends near-term will depend on capex cadence and access to financing. DPS and total dividends are unreported, and DOE is shown as 0.0 in XBRL, limiting precision. Policy-wise, a low payout aligned with growth investment appears prudent; if capex moderates or new stores mature, FCF coverage should improve.

Risk Assessment

Business Risks:

• Margin compression during expansion (operating margin down ~82 bps YoY).
• Execution risk on new unit openings and ramp to target unit economics.
• Potential cost inflation (labor, rent, raw materials) impacting SG&A and COGS.
• Demand sensitivity in discretionary dining sector affecting traffic and pricing.

Financial Risks:

• Liquidity risk: current ratio 0.71 and negative working capital (-19.80).
• Capex-driven negative FCF (-14.44) requiring financing or cash drawdown.
• Potential off-balance sheet lease commitments not reflected in reported debt.
• Moderate leverage (D/E 1.12x) could rise if financed expansion continues.

Key Concerns:

• Sustained sub-1.0 liquidity metrics increase short-term funding pressure.
• Operating deleverage as revenue outpaces operating profit growth.
• Visibility on SG&A components and lease obligations is limited due to non-disclosure.
• Reliance on continued strong OCF to fund growth amid negative FCF.

Investment Implications

Key Takeaways:

• High-quality earnings with OCF/NI at 1.87x underpin a strong ROE of 21.1%.
• Operating and net margin compressed by ~82 bps and ~50 bps YoY, respectively.
• Liquidity is tight (current ratio 0.71), despite strong interest coverage (87.7x).
• Negative FCF (-14.44) reflects aggressive growth capex (-51.92).
• Leverage is moderate (D/E 1.12x) with long-term loans at 41.16.

Metrics to Watch:

• Operating margin trajectory and SG&A as a percentage of sales.
• Same-store sales and new store ramp performance (proxy via revenue growth versus unit additions).
• OCF to NI ratio stability and working capital movements.
• FCF and capex intensity relative to expansion plans.
• Liquidity ratios (current and quick) and any increase in short-term borrowings.
• Disclosure of lease liabilities and total interest-bearing debt.

Relative Positioning: Within Japan’s restaurant/franchise operators, the company exhibits above-average ROE and strong cash conversion but weaker liquidity, with profitability currently constrained by expansion-related operating deleverage.

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