OYO Corporation FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥55.86B
• Operating Income: ¥3.15B
• Net Income: ¥2.89B
• EPS: ¥139.19

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

Applied Geotechnical Co., Ltd. (TSE: 9755) reported FY2025 Q3 consolidated results under JGAAP showing steady top-line growth but margin compression at the operating level. Revenue rose 3.8% YoY to ¥55.86bn, while operating income declined 4.1% YoY to ¥3.15bn, indicating negative operating leverage in the period. Gross profit reached ¥16.94bn with a gross margin of 30.3%, suggesting healthy project-level economics but likely higher SG&A or cost inflation impacting operating margin. Ordinary income was ¥3.76bn, exceeding operating income by ¥0.62bn, implying contribution from non-operating items (e.g., interest income, equity-method gains, or other non-operating gains). Net income increased 13.4% YoY to ¥3.19bn, supported by non-operating and likely extraordinary gains, as implied by the gap between ordinary income and estimated pretax profits. Balance sheet quality is strong with total assets of ¥105.0bn, equity of ¥76.6bn, and liabilities of ¥28.1bn, resulting in very low leverage (L/E ≈ 0.37x) and ample liquidity (current ratio 4.39x, quick ratio 4.28x). The implied equity ratio is approximately 73.0%, despite the reported 0.0% placeholder, signaling a highly conservative capital structure. DuPont analysis yields ROE of 4.17%, driven by a 5.71% net margin, asset turnover of 0.532x, and modest financial leverage of 1.37x; this indicates returns are primarily operational, not leverage-driven. Interest coverage is robust at about 57x (operating income/interest expense), underscoring low financial risk. The effective tax rate appears around 28% based on reported tax expense and inferred pretax profit, rather than the placeholder 0.0% shown in the auto-metrics. Working capital is abundant at ¥59.04bn, consistent with the business model’s receivables intensity in engineering/consulting services. Cash flow statement items (OCF/FCF) and D&A are not disclosed in the provided feed and show as zeros; these are unreported values rather than true zeros and should not be interpreted as cash flow weakness. Dividend data are likewise unreported here (DPS and payout shown as zero placeholders) despite positive EPS of ¥139.19. Using EPS and net income, average shares outstanding are inferable at roughly 22.9 million, though the share count line item is undisclosed. Overall, the company demonstrates resilient demand and very strong balance sheet health, but operating margin pressure warrants monitoring. Data limitations, especially around cash flows, D&A, and shareholder returns, constrain the depth of cash conversion and dividend sustainability analysis.

Profitability Analysis

ROE decomposition (DuPont): Net profit margin 5.71% (¥3.191bn/¥55.858bn), asset turnover 0.532x (¥55.858bn/¥104.999bn), and financial leverage 1.37x (assets/equity = ¥104.999bn/¥76.612bn) result in a calculated and reported ROE of 4.17%. Operating margin is approximately 5.63% (¥3.145bn/¥55.858bn), down YoY in absolute operating profit despite higher revenue, indicating negative operating leverage and/or mix headwinds. Gross margin is 30.3%, implying project-level profitability remains solid; the compression from gross to operating margin suggests higher SG&A, labor cost inflation, subcontracting costs, or bid pressure. Ordinary income exceeding operating income by ¥0.62bn indicates positive non-operating contributions (e.g., financial income or equity-method). The delta between inferred pretax profit (¥4.43bn = net income ¥3.191bn + tax ¥1.241bn) and ordinary income (¥0.67bn) points to extraordinary gains, which lifted bottom-line results. Interest expense is minimal at ¥55m, yielding interest coverage of ~57x; profitability is not constrained by financing costs. Overall profitability quality appears mixed: recurring operating profitability softened, while non-operating/extraordinary items supported net earnings, temporarily boosting net margin and ROE.

Growth Assessment

Revenue grew 3.8% YoY to ¥55.86bn, consistent with steady demand across geotechnical/engineering services, likely supported by public infrastructure and disaster-mitigation work. However, operating income fell 4.1% YoY, implying that growth came with margin trade-offs, possibly due to staffing, subcontracting rates, or project mix shifts toward lower-margin work. Net income rose 13.4% YoY, benefiting from non-operating and extraordinary gains; this increases headline growth but may be less repeatable. Sustainability of revenue growth appears reasonable given sector fundamentals, but earnings growth sustainability is less certain without operating margin recovery. The contribution of non-operating/extraordinary gains to profit elevates the risk of normalization effects in subsequent periods. Outlook hinges on backlog quality, bid discipline, and labor utilization, which are not disclosed here. With a strong balance sheet and low leverage, the company has capacity to invest in capabilities (digital surveying, monitoring) and talent to support medium-term growth. Near-term, focus should be on restoring operating leverage: conversion of revenue growth into operating profit via cost control and improved mix. Absent cash flow and order-intake data, we assume stable demand but flag earnings quality as partly non-recurring this quarter.

Financial Health

Liquidity is very strong: current assets ¥76.47bn vs current liabilities ¥17.43bn yield a current ratio of 4.39x and a quick ratio of 4.28x (inventory only ¥1.88bn, reflecting an asset-light service model). Solvency is robust with total liabilities of ¥28.08bn and equity of ¥76.61bn; the liabilities-to-equity ratio is ~0.37x. The implied equity ratio is ~73.0% (equity/assets), despite the 0.0% placeholder, indicating substantial capital buffers. Interest expense is negligible at ¥55m, and coverage by operating income is ~57x, minimizing refinancing risk. Working capital of ¥59.04bn suggests ample cushion to manage project timing and receivable collections. No data on cash and equivalents is provided (reported as zero but unreported), but given current assets composition, liquidity likely includes significant cash and receivables. Overall, the balance sheet is conservative and resilient.

Cash Flow Quality

Cash flow data (OCF, capex/ICF, FCF) and D&A are unreported in this dataset (displayed as zeros), so we cannot directly assess cash conversion or capital intensity for the period. Under a typical engineering/consulting profile, earnings quality is often influenced by the pace of billing and collections; the high level of current assets relative to sales suggests material receivables, but detailed working capital movements are unavailable. Free cash flow cannot be computed reliably without OCF and investment cash flows; the stated FCF ‘0’ is a placeholder. The OCF/Net Income ratio shown as 0.00 is not meaningful here. We note that low inventory and asset-light operations usually support moderate capex and reasonable cash conversion over the cycle, but quarter-to-quarter cash flow can be volatile due to project milestones. Key to earnings quality will be alignment of revenue recognition with cash collections and disciplined WIP management—metrics not disclosed in the provided feed.

Dividend Sustainability

Dividend per share and payout ratios are unreported (shown as zeros). EPS for the period is ¥139.19; using net income of ¥3.191bn, implied average shares are roughly 22.9 million, but the official share count is not disclosed here. With strong liquidity and low leverage, the balance sheet could support dividends in principle; however, without actual DPS, historical payout policy, or cash flow data, we cannot assess coverage or sustainability. If extraordinary gains contributed meaningfully to net income this period, a normalized payout assessment should reference operating earnings and OCF once disclosed. Policy outlook depends on management’s capital allocation between growth investments, working capital needs, and shareholder returns; absent guidance, we refrain from drawing conclusions.

Risk Assessment

Business Risks:

• Margin pressure from labor cost inflation and subcontracting costs impacting operating leverage
• Project mix and bid competitiveness leading to variability in gross and operating margins
• Timing of public-sector budgets and disaster-related spending creating demand cyclicality
• Execution risk on complex geotechnical and monitoring projects (schedule and cost overrun risk)
• Revenue recognition and milestone timing affecting quarterly volatility
• Talent acquisition and retention in specialized engineering fields

Financial Risks:

• Receivables concentration and collection timing given high current assets relative to sales
• Potential normalization of non-operating/extraordinary gains that inflated net income
• Limited visibility on cash flows, capex, and D&A due to undisclosed items in this dataset
• Exposure to interest income variability if cash balances are significant (non-operating income sensitivity)

Key Concerns:

• Operating income decline despite revenue growth indicates negative operating leverage
• Bottom-line growth appears supported by non-recurring items; earnings quality needs validation
• Absent cash flow disclosure hinders assessment of cash conversion and dividend capacity

Investment Implications

Key Takeaways:

• Top-line growth of 3.8% YoY with operating income down 4.1% signals margin compression
• Net income up 13.4% aided by non-operating/extraordinary gains; sustainability uncertain
• Balance sheet is very strong with implied equity ratio ~73% and interest coverage ~57x
• ROE of 4.17% reflects modest leverage and mid-single-digit net margin; uplift requires operating margin recovery
• Working capital is ample (¥59.04bn), supporting execution but requires disciplined collections

Metrics to Watch:

• Order intake/backlog and book-to-bill ratio
• Gross margin and SG&A ratio trends (operating margin bridge)
• Receivables days and OCF/Net income once disclosed
• Capex and D&A to gauge capital intensity and maintenance needs
• Non-operating and extraordinary items magnitude to assess earnings quality
• Headcount/utilization rates and subcontracting ratio (cost control indicators)

Relative Positioning: Within Japan’s engineering/geotechnical services peer set, the company appears conservatively capitalized with strong liquidity and low leverage, consistent with an asset-light consulting profile; operating profitability this quarter lagged revenue growth, placing emphasis on execution and mix improvement to close the margin gap versus steady peers.

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