NISHIO HOLDINGS CO.,LTD. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥214.95B
• Operating Income: ¥19.60B
• Net Income: ¥12.17B
• EPS: ¥436.19

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

Verdict: Solid finish to FY2025 with steady top-line growth and resilient operating profitability, offset by slight compression at the bottom line due to non-operating headwinds and taxes. Revenue rose 8.0% YoY to 2,149.54, with operating income up 8.6% YoY to 196.02 and net income up 4.4% YoY to 121.09. Gross profit was 870.99, implying a gross margin of 40.5% on the year. Operating margin was 9.1% (196.02/2,149.54), effectively flat to modestly higher YoY given operating income outpaced revenue by 0.6 pts in growth terms. Calculations indicate operating margin expanded by about 5 bps YoY (from ~9.07% to ~9.12%), while net margin slipped by roughly 20 bps (from ~5.83% to ~5.63%) due to a negative non-operating balance and a 32.6% effective tax rate. Ordinary income grew 8.2% YoY to 188.27, despite net non-operating expense of 7.75 (12.26 income vs 20.01 expense). EBITDA reached 532.05, for a healthy EBITDA margin of 24.8%, underscoring robust cash earnings in a capital-intensive rental model. Cash flow quality was strong: operating cash flow of 318.09 exceeded net income 2.63x, and free cash flow of 275.97 was ample after modest capex of 42.36 relative to depreciation of 336.03. Liquidity was sound with a current ratio of 140.3% and a quick ratio of 135.9%, while leverage remained conservative (D/E 1.12x; interest coverage 10.71x). Balance sheet strength is notable with equity of 1,402.89 against assets of 2,972.61 (equity ratio ~47%), providing flexibility for fleet renewal and growth investments. ROE printed 8.6% via a 5.6% net margin, 0.723x asset turnover, and 2.12x leverage, broadly aligned with capital cost considerations. ROIC at 10.8% exceeds common 7–8% targets, indicating value-accretive deployment despite a heavy depreciation load. Earnings quality is high this year; however, sustainability of FCF should be monitored given capex trailing depreciation in a rental business. Dividend capacity appears robust with a calculated payout ratio of 29.5% and FCF coverage of 7.71x, though DPS specifics were unreported. Forward-looking, stable utilization, disciplined capex, and controlled non-operating costs will be key to preserving margin and ROE amid demand normalization and interest-rate sensitivity.

Profitability Analysis

ROE decomposition: ROE (8.6%) = Net Profit Margin (5.6%) × Asset Turnover (0.723) × Financial Leverage (2.12x). The component with the most notable change this year appears to be net margin, which compressed slightly (net income +4.4% vs revenue +8.0%), while operating leverage held steady to slightly positive (operating income +8.6%). Business drivers: a negative non-operating result (net -7.75) and a 32.6% tax rate weighed on the bottom line, partly offsetting operational gains. Asset turnover at 0.723 indicates good capital throughput for a rental fleet business; with revenue growth outpacing likely asset base growth, turnover did not deteriorate and may have improved modestly. Leverage at 2.12x is moderate, supporting ROE without undue financial risk given interest coverage of 10.71x. Sustainability: operating margin resilience looks sustainable if utilization and pricing remain firm; however, net margin could remain under pressure if non-operating costs (interest and others) or taxes stay elevated. Watch for any SG&A drift: while the detailed SG&A breakdown is limited, the absolute SG&A of 674.96 implies tight cost control relative to revenue growth; no flag of SG&A growth outpacing revenue is evident. Overall, ROE quality is acceptable with most contribution from operating performance and reasonable leverage.

Growth Assessment

Revenue rose 8.0% YoY to 2,149.54, supported by steady demand and likely healthy utilization in the equipment rental core. Operating income increased 8.6%, slightly outpacing revenue, indicating stable pricing and cost discipline. Net income was up 4.4%, lagging revenue growth due to higher non-operating expenses and a 32.6% effective tax rate. Gross margin at 40.5% and EBITDA margin at 24.8% are consistent with a scale rental business; the operating margin of 9.1% shows resilience. The outlook hinges on capex execution (fleet refresh vs growth) and utilization; with ROIC at 10.8%, incremental investments remain value-accretive if returns are maintained. Non-operating headwinds (interest, other) and tax mix will shape net-level growth; a stable rate environment would help narrow the gap between operating and net profit growth. Given strong OCF and FCF, the company has latitude to fund growth while maintaining balance sheet strength.

Financial Health

Liquidity: current ratio 140.3% and quick ratio 135.9% indicate solid short-term coverage; no warning triggers (both >1.0), albeit slightly below the 1.5x healthy benchmark for the current ratio. Working capital of 353.02 and cash of 622.03 provide ample buffer against 876.55 of current liabilities. Solvency: debt-to-equity is 1.12x, within conservative bounds (<1.5 benchmark), with loans totaling ~438.75 (short-term 52.90; long-term 385.85). Interest coverage at 10.71x (operating income basis) is strong. The equity ratio is approximately 47% (1,402.89/2,972.61), indicating a well-capitalized balance sheet. Maturity mismatch risk appears low: cash and receivables (≈1,064) comfortably exceed short-term borrowings (52.90) and accounts payable (267.84). No off-balance sheet obligations were reported; monitoring for operating leases or guarantees remains prudent in a rental model. No warnings for Current Ratio <1.0 or D/E >2.0.

Cash Flow Quality

OCF of 318.09 versus net income of 121.09 yields OCF/NI of 2.63x, indicating high-quality earnings and strong cash conversion. Free cash flow of 275.97 (after investing CF of -42.12, with capex -42.36) comfortably covers typical shareholder returns and debt service. The gap between depreciation (336.03) and capex (42.36) boosted cash generation; while positive for FY2025, this may not be structurally sustainable for a fleet-intensive business if capex normalizes toward depreciation over the cycle. Working capital appears well managed given strong OCF; no signs of aggressive manipulation (e.g., outsized receivable build or inventory swings) are evident in the reported snapshot. Interest obligations are modest relative to EBITDA and OCF, supporting ongoing deleveraging capacity if desired.

Dividend Sustainability

With a calculated payout ratio of 29.5% and FCF coverage of 7.71x, dividend capacity appears robust. Although annual DPS and total dividends paid were unreported, internal cash generation and balance sheet strength suggest ample headroom to maintain or gradually increase distributions within policy. Given OCF durability and modest financing outflows (-151.83), dividends appear sustainable even with a normalization of capex toward depreciation, assuming operating conditions remain stable. Policy clarity would improve visibility; absent reported DPS, we infer adherence to a conservative payout approach consistent with the ~30% payout ratio.

Risk Assessment

Business Risks:

• Demand cyclicality tied to construction and infrastructure activity affecting utilization and pricing
• Capex intensity and fleet refresh needs; capex below depreciation this year may need to normalize
• Competitive pressure in equipment rental potentially compressing margins
• Operational execution risk in cost control (SG&A) as scale increases

Financial Risks:

• Non-operating expense burden (net -7.75) and a high effective tax rate (32.6%) weighing on net margins
• Interest rate sensitivity on floating-rate debt and future refinancing
• Potential working capital swings impacting OCF in downcycles despite current strength

Key Concerns:

• Slight net margin compression (~20 bps YoY) despite operating stability
• Sustainability of FCF if capex reverts toward depreciation in a fleet-heavy model
• Limited disclosure on SG&A components and dividends (DPS unreported), reducing transparency

Investment Implications

Key Takeaways:

• Steady top-line growth (+8.0%) with operating margin resilience (+~5 bps YoY) and strong EBITDA margin (24.8%)
• High-quality earnings with OCF/NI of 2.63x and sizable FCF (275.97)
• Balance sheet strength (equity ratio ~47%, interest coverage 10.71x, D/E 1.12x) provides optionality
• ROE of 8.6% and ROIC of 10.8% indicate value-accretive operations
• Net-level pressure stems from non-operating costs and taxes; improving these could lift ROE

Metrics to Watch:

• Utilization rates and pricing in the rental fleet (proxy for asset turnover and margin)
• Capex versus depreciation trajectory and fleet age profile
• Non-operating expense run-rate (interest and other) and effective tax rate
• OCF/NI ratio sustainability and working capital movements
• Debt/EBITDA and interest coverage amid rate fluctuations

Relative Positioning: Within equipment rental peers, the company exhibits balanced growth, solid operating margins, superior cash conversion, and moderate leverage; maintaining ROIC > WACC and disciplined capex should keep it competitively well-positioned.

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