Lilycolor Co.,Ltd. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥23.65B
• Operating Income: ¥228M
• Net Income: ¥183M
• EPS: ¥14.88

Income Statement

Balance Sheet

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: Despite a 6.7% revenue decline, FY2025 Q3 delivered a sharp profit rebound at the operating and ordinary levels, but headline figures show internal inconsistencies around below-the-line items that warrant caution. Revenue was 236.52 and operating income rose 348.8% YoY to 2.28, taking operating margin to roughly 1.0%. Ordinary income climbed 464.3% to 1.73, implying non-operating losses netted to about -0.54 (0.34 income vs 0.88 expense). Net income increased 304.8% to 1.83, taking net margin to 0.8% (calculated). Gross profit was 75.58 with a gross margin of 32.0%, but SG&A of 78.11 exceeded gross profit; the positive operating income implies unreported other operating items of approximately +4.8. Operating margin expanded about 76 bps YoY (from ~0.20% to ~0.96%), helped by cost control/other operating gains despite lower sales. Net margin expanded roughly 60 bps YoY (from ~0.18% to ~0.78%). Interest coverage is solid at 15.15x (2.28/0.15), and liquidity appears healthy with a current ratio of 155.3%. Leverage is moderate with D/E at 1.54x and financial leverage at 2.63x, supporting ROE of 2.4% despite thin margins. ROIC is low at 2.9%, below the 5% warning threshold, signaling subdued capital efficiency. Reported PBT (-3.08) does not reconcile with ordinary income (1.73) and net income (1.83), suggesting sizable extraordinary items or classification effects not disclosed in the data. Effective tax rate is listed at 11.1%, alongside a reported tax benefit (-0.34), further indicating non-recurring or timing items. Cash flow data are unreported, limiting assessment of earnings quality and dividend coverage; the calculated payout ratio of 249.1% appears unsustainably high absent extraordinary support. Forward-looking, sustaining profit improvement will hinge on strict SG&A discipline, confirmation of recurring operating gains (vs one-offs), and stabilization of top-line trends.

Profitability Analysis

ROE decomposition (DuPont): ROE 2.4% = Net Profit Margin (0.8%) × Asset Turnover (1.156) × Financial Leverage (2.63x). The biggest swing YoY is in profitability (net and operating margins), evidenced by operating income up 348.8% despite a 6.7% sales decline. Business drivers likely include improved project mix/pricing, cost actions, and positive other operating items (implied +~4.8) that offset SG&A exceeding gross profit. Asset turnover at 1.156 suggests reasonable utilization of the asset base; leverage (2.63x) is providing a meaningful boost to ROE given low margins. Sustainability: Margin gains look partly cyclical or one-time given the discrepancy between gross profit and SG&A and the need for unreported other operating gains to deliver positive operating income; without continued operating improvements, margin expansion may fade. Watch for SG&A discipline: SG&A exceeding gross profit is a concern; if SG&A growth outpaces revenue (not disclosed), operating leverage could turn negative. Overall, ROE is primarily constrained by very thin net margins; leverage is already contributing, so structural margin improvement is the key lever.

Growth Assessment

Revenue declined 6.7% YoY to 236.52, indicating soft demand or deliberate pruning of low-margin business. Operating income grew sharply to 2.28 (from ~0.51), demonstrating improved profitability despite lower volume. Ordinary income of 1.73 (vs ~0.31 prior) confirms improved core earnings after financing and non-operating items, although non-operating expenses still outweighed income. Net income rose to 1.83 (vs ~0.45), but the PBT inconsistency suggests possible extraordinary factors that cloud true run-rate performance. Margin expansion YoY: operating margin +~76 bps and net margin +~60 bps, chiefly from cost/mix and other operating items. Revenue sustainability is uncertain without order/backlog data; continued top-line pressure could cap further profit gains unless cost reductions persist. Non-operating line shows net expense, so future profit growth depends on operating discipline rather than financial income. Near-term outlook hinges on controlling SG&A, sustaining gross margin at ~32%, and avoiding extraordinary losses; confirmation via OCF trends (unreported) will be important.

Financial Health

Liquidity: Current assets 165.06 vs current liabilities 106.27 yields a current ratio of 155.3% (healthy) and a quick ratio of 155.3%, indicating ample short-term coverage even without inventory disclosure. Solvency: Total liabilities 120.10 vs equity 77.75 implies D/E of 1.54x (slightly above the conservative benchmark but not excessive for a small-cap), with interest-bearing debt at least 26.17 (short-term 16.03, long-term 10.14). Interest coverage at 15.15x indicates low immediate refinancing stress. Maturity profile: Short-term loans of 16.03 are well covered by cash (32.86) and receivables (58.15), reducing maturity mismatch risk. No off-balance-sheet obligations are disclosed in the provided data. No explicit warnings triggered (Current Ratio > 1.0 and D/E ≤ 2.0). Overall balance sheet is liquid with moderate leverage.

Cash Flow Quality

Operating cash flow is unreported, so OCF/Net Income and FCF cannot be assessed; earnings quality thus cannot be confirmed. With SG&A exceeding gross profit, the positive operating income relies on other operating items, raising the bar for cash conversion to validate earnings quality. Working capital appears supportable given receivables 58.15 and cash 32.86; however, without OCF we cannot rule out collection delays or payables-driven boosts. Dividend coverage by FCF is not calculable; given low margins and limited operating cushion, sustained free cash generation must be demonstrated. No explicit signs of working capital manipulation can be inferred from the limited data, but the absence of inventory disclosure constrains analysis.

Dividend Sustainability

The calculated payout ratio is 249.1%, which would be unsustainably high relative to net income if accurate; however, DPS and total dividends are unreported, so this metric may reflect different timing or one-off factors. Without OCF/FCF data, coverage cannot be validated. Cash on hand (32.86) offers flexibility, but recurring earnings power is modest (net margin 0.8%, ROE 2.4%). Unless operating cash flow is materially above net income or dividends are adjusted downward, maintaining a >100% payout would pressure balance sheet resources. Policy outlook likely contingent on confirming stable profitability and cash generation; a conservative stance would be prudent until free cash flow visibility improves.

Risk Assessment

Business Risks:

• Top-line softness (-6.7% YoY) indicating demand or pricing pressure
• Thin structural margins (operating margin ~1.0%, net margin ~0.8%)
• Dependence on other operating gains to offset SG&A exceeding gross profit
• Execution risk in SG&A control and project/mix management
• Potential extraordinary items affecting comparability (PBT inconsistency)

Financial Risks:

• Moderate leverage (D/E 1.54x; financial leverage 2.63x) amid low margins
• Dividend sustainability risk (calculated payout ratio 249.1% without FCF support)
• Visibility risk from unreported cash flow statements (OCF/FCF unavailable)
• Negative/low effective tax items creating volatility in reported earnings

Key Concerns:

• ROIC at 2.9% below 5% threshold signals low capital efficiency
• Non-operating expenses exceed income, weighing on ordinary profit
• Data inconsistencies around PBT (-3.08) vs ordinary and net income suggest large undisclosed extraordinary impacts

Investment Implications

Key Takeaways:

• Profitability improved markedly YoY despite revenue decline, but sustainability hinges on recurring operations
• Operating margin expansion (~+76 bps YoY) achieved via cost/mix and other operating items
• Liquidity is solid; leverage is moderate with strong interest coverage
• Capital efficiency is weak (ROIC 2.9%, ROE 2.4%), highlighting need for margin and asset-turn improvement
• Dividend capacity unclear; calculated payout suggests potential pressure absent stronger FCF

Metrics to Watch:

• Operating cash flow and free cash flow conversion vs net income
• Gross profit vs SG&A trajectory and other operating income/expense
• Order intake/backlog and pricing to gauge revenue stabilization
• Extraordinary gains/losses and reconciliation between ordinary income and PBT
• Leverage trend (short-term loans) and interest coverage as rates/credit conditions evolve

Relative Positioning: Within small-cap interior/construction-material peers, the company shows better short-term operating momentum but lags on capital efficiency and structural margins; balance-sheet liquidity is a relative strength, while cash-flow visibility and dividend coverage are key differentiators to monitor.

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