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

Lilycolor Co., Ltd. (TSE: 9827) reported FY2025 Q3 standalone results under JGAAP with revenue of ¥23,652 million, down 6.7% year on year, but with a sharp rebound in profitability at the operating and net levels. Gross profit was ¥7,558 million, translating to a gross margin of 32.0%, indicating reasonable pricing and mix resilience despite the top-line decline. Operating income rose to ¥228 million (+348.8% YoY), pushing the operating margin to roughly 1.0%, a notable turnaround that suggests effective SG&A discipline and/or mix improvements. Ordinary income was ¥173 million, below operating income due to non-operating costs including ¥15 million of interest expense. Net income increased to ¥183 million (+304.8% YoY), aided by a tax credit/benefit (income tax of -¥34 million), resulting in a very low reported effective tax rate. DuPont analysis indicates ROE of 2.35%, decomposing into a net margin of 0.77%, asset turnover of 1.156x, and financial leverage of 2.63x; the primary drag is the thin net margin. Liquidity appears sound with current assets of ¥16,506 million and current liabilities of ¥10,627 million, yielding a current ratio of 155.3% and working capital of ¥5,879 million. Total liabilities are ¥12,010 million against total assets of ¥20,463 million and equity of ¥7,775 million, implying an equity ratio around 38% (the reported equity ratio of 0.0% reflects non-disclosure in XBRL, not an actual zero). Interest coverage is 15.2x (operating income/interest), indicating manageable debt service at current earnings levels. Cash flow details (OCF/FCF/cash) are unreported in this filing; therefore, assessments of cash conversion and free cash flow sustainability are limited and should be treated cautiously. Depreciation is also unreported; EBITDA-based metrics are not meaningful in this dataset. Dividend data are not disclosed (DPS and payout shown as zero indicate non-reporting), so no inference about dividend policy can be made this quarter. The revenue contraction alongside improved operating income points to positive operating leverage after cost actions, but sustainability depends on demand recovery and stable gross margins. With ROE at 2.35%, returns remain modest relative to typical cost of equity, and further margin expansion or asset efficiency improvements are needed. Overall, financial health is acceptable with ample liquidity, moderate leverage (debt-to-equity 1.54x using total liabilities as proxy), and adequate interest coverage, but the lack of cash flow disclosure is a key limitation for assessing earnings quality and dividend capacity.

Profitability Analysis

ROE_decomposition: ROE 2.35% = Net margin 0.77% × Asset turnover 1.156 × Financial leverage 2.63. The low net margin is the principal constraint on ROE; leverage provides some lift, while asset turnover is reasonable for a distributor/manufacturer hybrid model. margin_quality: Gross margin stands at 32.0%, suggesting solid pricing/mix despite revenue decline. Operating margin is ~1.0% (¥228m/¥23,652m), indicating that SG&A intensity remains high but improved materially YoY. Ordinary profit trails operating profit due to interest and other non-operating items. The negative tax expense boosted net margin; excluding this benefit, underlying net margin would be lower. operating_leverage: Despite a 6.7% YoY revenue decline, operating income rose 3.5x, evidencing favorable operating leverage from cost reductions and/or mix optimization. Sustained leverage will depend on maintaining gross margin while preventing SG&A from re-inflating as volumes normalize.

Growth Assessment

revenue_sustainability: Revenue of ¥23.65bn declined 6.7% YoY, likely reflecting softer construction/interior demand and project timing. Without order/backlog data, visibility is limited; sustainability hinges on housing starts, non-residential fit-out activity, and competitive pricing. profit_quality: The step-up in operating income with lower sales indicates improved cost discipline. However, net income benefited from a tax credit (income tax -¥34m), and non-operating costs (interest) diluted ordinary income, so bottom-line quality is mixed. outlook: Key to growth will be stabilizing demand in interiors/wallcoverings and continued SG&A control. If gross margin can be kept near 32% and operating costs contained, low-single-digit operating margin is achievable, supporting gradual ROE recovery; absent volume recovery, profit growth may stall.

Financial Health

liquidity: Current assets ¥16,506m vs current liabilities ¥10,627m; current ratio 155.3% and quick ratio 155.3% (inventories unreported). Working capital totals ¥5,879m, providing a buffer for seasonality and project timing. solvency: Total liabilities ¥12,010m and equity ¥7,775m imply debt-to-equity of 1.54x (using total liabilities as a proxy for debt) and an implied equity ratio of ~38% (equity/assets). Interest coverage is 15.2x, indicating comfortable debt service at current profit levels. capital_structure: Leverage is moderate with financial leverage of 2.63x in the DuPont framework. Ordinary income is below operating income, reflecting non-operating costs; exposure to interest rate changes is present but not acute given coverage.

Cash Flow Quality

earnings_quality: Operating, investing, and financing cash flows are unreported this period (zeros reflect non-disclosure). As a result, OCF/Net Income, cash conversion, and accrual intensity cannot be assessed from this dataset. FCF_analysis: Free cash flow is unreported; we cannot gauge capex requirements or discretionary cash generation. Depreciation is also unreported, limiting EBITDA and maintenance capex inference. working_capital: Working capital is positive at ¥5,879m, but component details (inventories, receivables, payables turnover) are not disclosed here, constraining analysis of cash tied in operations.

Dividend Sustainability

payout_ratio_assessment: Dividend per share and payout ratio are shown as zero due to non-disclosure; no conclusion can be drawn from this dataset about current payout policy. FCF_coverage: FCF coverage cannot be evaluated because OCF and capex are unreported. Dividend sustainability assessment requires cash flow disclosure. policy_outlook: With ROE at 2.35% and moderate leverage, capacity for distributions would depend on underlying OCF stability and capital needs; absent cash flow data, we refrain from inferring policy changes.

Risk Assessment

Business Risks:

• End-market cyclicality in residential and non-residential interior fit-outs affecting order volumes and pricing.
• Raw material cost volatility (e.g., vinyl chloride, textiles) and import cost inflation, including FX-driven effects.
• Competitive pricing pressure from domestic and overseas suppliers, potentially compressing gross margins.
• Project timing risk and seasonality leading to revenue volatility and operating leverage swings.
• Customer concentration in construction distributors/wholesalers, if present, amplifying volume risk.
• Execution risk in SG&A control; reversal could erode the recent operating margin recovery.

Financial Risks:

• Moderate leverage (debt-to-equity ~1.54x using liabilities) exposes earnings to interest costs.
• Interest rate risk on floating-rate liabilities could compress ordinary income if rates rise.
• Working capital funding needs during demand upswings without sufficient OCF could pressure liquidity.
• Limited visibility due to unreported cash flow and depreciation data hinders monitoring of earnings quality.

Key Concerns:

• Sustainability of margin improvement amid declining sales.
• Dependence of net income on tax benefits in the quarter.
• Absence of cash flow disclosure impeding assessment of dividend capacity and cash conversion.

Investment Implications

Key Takeaways:

• Revenue declined 6.7% YoY to ¥23.65bn, but operating income surged to ¥228m (+348.8% YoY).
• Gross margin held at 32.0%; operating margin improved to ~1.0% on cost discipline.
• ROE is modest at 2.35%, constrained by a 0.77% net margin despite leverage of 2.63x.
• Liquidity is solid with a 155% current ratio and ¥5.88bn working capital.
• Interest coverage is comfortable at 15.2x; ordinary income trails operating due to non-operating costs.
• Cash flow (OCF/FCF) and depreciation are unreported, limiting earnings quality assessment.
• Dividend data are not disclosed; no view on payout sustainability can be formed from this dataset.

Metrics to Watch:

• Gross profit margin and SG&A-to-sales ratio to gauge durability of margin recovery.
• Order backlog and book-to-bill (if disclosed) for demand visibility.
• Operating cash flow, OCF/Net Income ratio, and free cash flow once reported.
• Working capital efficiency: receivable days, payable days, and inventory turns (when disclosed).
• Ordinary income to operating income gap, indicating non-operating cost trends.
• Leverage metrics (net debt/EBITDA when available) and interest coverage.
• ROE trajectory and asset turnover as indicators of capital efficiency.

Relative Positioning: Within domestic interior materials and wallcovering peers, Lilycolor demonstrates resilient gross margins but weaker ROE due to thin operating margins; liquidity is adequate and leverage moderate, positioning the company as operationally stable but return-challenged pending sustained margin gains and clearer cash flow conversion.

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