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Omega Investment Co., Ltd.

Itoki (Company note – 4Q update)

Coverage
Share price (3/5) ￥1,625 Dividend Yield (25/12 CE) 4.00 %
52weeks high/low ￥1,062/1,933 ROE(24/12 act) 13.79 %
Avg Vol (3 month)  214 thou shrs Operating margin (24/12 act) 7.3 %
Market Cap ￥86.7 bn Beta (5Y Monthly) 0.41
Enterprise Value ￥95.3 bn Shares Outstanding 53.38 mn shrs
PER (25/12 CE) 9.99 X Listed market TSE Prime
PBR (24/12 act) 1.62 X    
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Full-Year Earnings Registered Record Highs: Rising Expectations for Achieving the Medium-Term Management Plan Through Further Revenue and Profit Growth

 ◇ FY12/2024 full-year financial highlights: Record-high revenue and operating profit

On February 13, 2025, Itoki announced its full-year earnings results for FY2024, with revenue, operating profit, ordinary profit, and net income attributable to owner of parent all reaching record highs. Revenue was 138.46 billion yen (+4% YoY), operating profit was 10.07 billion yen (+18% YoY), ordinary profit was 10.00 billion yen (+16% YoY), and net income attributable to owner of parent  was 7.18 billion yen (+21% YoY), achieving the company’s earnings forecast. Revenue increased for the third consecutive year, and operating profit for the fifth consecutive year, with ROE at 13.8% (+2.5pt YoY), and an employee engagement score of 82.5% (+7.8pt YoY).

The primary growth driver was the Workplace Business. Amid rising demand for office space renewals as a pillar of investment in human capital by customers (such as recruitment, retention, and productivity improvement), Itoki expanded its comprehensive business strategy beyond the Tokyo metropolitan area by providing integrated services, including design, specification, and construction. As a result, profitability improved not only through product price revisions but also through multifaceted cost optimizations.

On the other hand, the Equipment & Public Works-Related Business saw a slight decline in revenue and operating profit. While demand for research facilities remained strong, public facility equipment revenue declined as expected. Additionally, due to rising material costs and labor shortages, the construction of logistics facilities was delayed, impacting the timing of revenue recognition. However, profitability was maintained, and the overall proportion of this segment in total earnings remained small.

Furthermore, investments were made in personnel expenses, DX promotion costs, and the showroom/head office renovation, resulting in a well-balanced earnings outcome rather than an excessive focus on profitability.

Orders for the Office 3.0 area that manages office space data to monitor and propose productivity improvements, reached 60 cases, significantly exceeding the target of 40 cases.

While operating cash flow turned negative at JPY -1.0 billion, this was mainly due to a temporary increase in payments following the abolition of promissory notes.

Additionally, in November 2024, the Japan Fair Trade Commission warned about potential violations of the Antimonopoly Act concerning payments to logistics contractors. However, financial adjustments for past transactions have been completed, and the major payments have already been settled. The company has also made progress in ensuring transaction fairness and compliance, reducing concerns related to this issue.

◇ Further strengthening of corporate structure

In addition to compliance improvements, four key topics were highlighted in the latest earnings announcement: 1.Credit rating acquisition: In January 2025, Itoki obtained a new issuer rating of “A- (Stable)” from the Rating and Investment Information, Inc. (R&I). This paves the way for flexible debt financing beyond bank reliance. 2.Abolition of anti-takeover measures: This move demonstrates management’s confidence while ensuring that potential acquirers who can enhance corporate value are not unnecessarily obstructed. This will attract more investors interested in holding the company’s stock. 3.SCM system implementation: The new SCM system is scheduled to go live in June 2025, seven months later than initially planned. Once operational, it is expected to significantly enhance overall labor productivity. 4.Board governance enhancement: The company plans to increase the number of external directors, with formal approval expected at the 75th Annual General Meeting of Shareholders on March 26, 2025. As a result, the board composition will shift from 5 internal and 3 external directors to an equal balance of 4 internal and 4 external directors. The two new external directors are expected to contribute to capital cost management, compliance reinforcement, and human resource development. Furthermore, Itoki promotes appointing external executive officers and younger leadership, indicating strong momentum for corporate transformation.

◇ FY12/2025 Full-Year earnings forecast: Continued revenue and profit growth expected

The company has announced its FY12/2025 earnings forecast, targeting revenue of 145.0 billion yen (+4% YoY), operating profit of 11.5 billion yen (+14% YoY), ordinary profit of 11.5 billion yen (+14% YoY), and net income attributable to owner of parent of 8.0 billion yen (+11% YoY), aiming for consecutive record-high earnings.

The Workplace Business is expected to continue driving growth, supported by a favorable business environment and the company’s optimal strategies, as we have seen. Based on the current sales pipeline, the earnings forecast appears reasonable.

Additionally, the annual dividend per share is expected to increase by 10 yen to 65 yen, with a projected payout ratio of 40%.

◇ Share price trends and future points of interest

Since 2022, Itoki’s stock price has risen significantly until April 2024. However, it has since stabilized in the 1,500–1,600 yen range, which is in line with earnings progress.

Following the latest full-year earnings announcement, the stock price briefly rose to 1,812 yen, suggesting a potential new upward phase, but it is currently hovering around 1,650 yen.

This stock movement reflects the continued revenue and profit growth and improving ROE, which support the stock price. However, the profit growth has slowed compared to previous years, making it harder to identify the next catalyst for a stock price rise.

For the stock to resume a steady upward trend, several factors will be crucial: 1.Progress in FY12/2025 earnings performance. 2.Higher confidence in revenue and profit growth for FY12/2026, the final year of the medium-term management plan, particularly with expectations of a 2.5 billion yen operating profit increase driven by operational efficiency improvements. 3.The emergence of new growth drivers beyond the current medium-term management plan, including the Office 3.0 area, the specialized facilities area, and overseas expansion. 4.Strengthened recurring revenue and stable earnings growth. 5.A long-term outlook on financial targets and the company’s M&A strategy remains a key investor interest.

As with last year, these key points may be addressed if an IR Day is held around mid-year. Investors should closely monitor earnings progress and management’s responses to these factors.

Company profile

Itoki Corporation (Itoki) is an office furniture manufacturer that designs tomorrow’s “workstyles”. It was founded in 1890. In addition to office furniture manufacturing, the company is also involved in construction and interior decoration. In 2022, Koji Minato was appointed president, and the company’s corporate structure has been transformed under his leadership. The company has advocated Office DX and Office 3.0 and is working to add high value. Under its three-year medium-term management plan, RISE TO GROWTH 2026, which ends in FY2026, the company is promoting the priority strategy ‘7 Flags’ and ESG strategies under the theme of ‘enhancing sustainable growth’. The plan aims to achieve sales of 150 billion yen, operating profit of 14 billion yen and ROE of 15% in FY2026.

Key financial data

Unit: million yen 2020/12 2021/12 2022/12 2023/12 2024/12 2025/12
CE
Sales 116,210 115,905 123,324 132,985 138,460 145,000
EBIT (Operating Income) 1,585 2,561 4,582 8,524 10,078 11,500
Pretax Income 1,277 1,523 8,372 8,378 10,071 11,500
Net Profit Attributable to Owner of Parent -235 1,166 5,294 5,905 7,183 8,000
Cash & Short-Term Investments 18,246 17,451 26,976 24,795 22,482  
Total assets 105,096 103,898 115,288 117,437 120,521  
Total Debt 17,308 17,308 17,308 17,308 37,533  
Net Debt -7,487 -7,487 -7,487 -7,487 15,051  
Total liabilities 60,901 58,818 65,374 62,434 71,174  
Total Shareholders’ Equity 54,960 54,960 54,960 54,960 49,260  
Net Operating Cash Flow 4,561 2,774 5,804 6,321 -1,000  
Capital Expenditure 3,316 3,316 3,316 3,316 6,036  
Net Investing Cash Flow -1,152 -1,170 4,923 -4,012 -7,107  
Net Financing Cash Flow -2,267 -2,658 -1,426 -4,148 5,905  
Free Cash Flow 3,005 3,005 3,005 3,005 -4,146  
ROA (%) -0.22 1.12 4.83 5.08 6.04  
ROE (%) -0.53 2.63 11.17 11.27 13.79  
EPS (Yen) -5.2 25.8 117.0 130.3 147.0 162.6
BPS (Yen) 970.4 993.9 1,101.3 1,212.0 1,001.1  
Dividend per Share (Yen) 13.00 15.00 37.00 42.00 55.00 65.00
Shares Outstanding (Milion shrs) 45.66 45.66 45.66 45.66 53.38  

Source: Omega Investment from company data, rounded to the nearest whole number.

Share price

Quarterly topics

【Highlights of full-year results】

Source: Company materials

【Analysis of changes in operating profits】

Source: Company materials

【Performance in each segment】

Source: Company materials

【Earnings forecast for FY ending December 2025】

Source: Company materials

【Earnings forecast for FY2025 in the Medium-term Management Plan 】

Source: Company material

【Status of held business negotiations in FY2025】

Source: Company material

Financial data (quarterly basis)

Unit: million yen 2022/12 2023/12 2024/12
  4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q 4Q
(Income Statement)                  
Sales 33,363 36,965 31,225 28,667 36,128 40,918 31,592 29,613 36,337
Year-on-year 4.7% 4.6% 9.9% 9.4% 8.3% 10.7% 1.2% 3.3% 0.6%
Cost of Goods Sold (COGS) 21,384 22,216 18,955 17,483 22,090 24,545 19,888 17,644 21,182
Gross Income 11,979 14,749 12,270 11,184 14,038 16,373 11,704 11,969 15,155
Gross Income Margin 35.9% 39.9% 39.3% 39.0% 38.9% 40.0% 37.0% 40.4% 41.7%
SG&A Expense 11,484 9,970 10,047 11,006 12,694 10,333 10,878 11,029 12,883
EBIT (Operating Income) 495 4,779 2,223 178 1,344 6,040 826 940 2,279
Year-on-year -40.3% 20.5% 444.9% -162.2% 171.5% 26.4% -62.8% 428.1% 69.6%
Operating Income Margin 1.5% 12.9% 7.1% 0.6% 3.7% 14.8% 2.6% 3.2% 6.3%
EBITDA 1,342 5,522 2,906 910 2,079 6,753 1,582 1,684 3,173
Pretax Income 3,351 4,804 2,275 363 936 6,006 1,328 1,035 1,702
Consolidated Net Income 1,767 3,297 1,411 202 997 4,104 985 725 1,409
Minority Interest -10 1 0 0 0 2 1 11 25
Net Income ATOP 1,777 3,296 1,411 202 996 4,101 985 714 1,383
Year-on-year 462.3% -2.7% 389.9% -227.0% -44.0% 24.4% -30.2% 253.5% 38.9%
Net Income Margin 5.3% 8.9% 4.5% 0.7% 2.8% 10.0% 3.1% 2.4% 3.8%
                   
(Balance Sheet)                  
Cash & Short-Term Investments 26,976 20,908 24,788 23,292 24,795 24,751 28,513 30,536 22,482
Total assets 115,288 115,841 111,693 111,573 117,437 127,459 120,701 120,935 120,521
Total Debt 19,487 18,387 17,361 17,342 17,308 38,662 41,566 42,881 37,533
Net Debt -7,489 -2,521 -7,427 -5,950 -7,487 13,911 13,053 12,345 15,051
Total liabilities 65,374 64,090 58,270 57,730 62,434 81,595 73,584 73,305 71,174
Total Shareholders’ Equity 49,871 51,709 53,379 53,800 54,960 45,818 47,068 47,571 49,260
                   
(Profitability %)                  
ROA 4.83 4.49 5.67 6.09 5.08 5.52 5.41 5.85 6.04
ROE 11.17 10.45 12.45 13.12 11.27 13.76 12.51 13.41 13.79
(Per-share) Unit: JPY                  
EPS 39.2 72.8 31.1 4.5 22.0 85.7 19.1 14.5 28.0
BPS 1,101.3 1,141.9 1,177.1 1,186.4 1,212.0 933.1 956.6 966.8 1,001.1
Dividend per Share 37.00 37.00 37.00 37.00 42.00 42.00 42.00 0.00 55.00
Shares Outstanding(milion shrs) 45.66 45.66 45.66 45.66 45.66 53.38 53.38 53.38 53.38

Source: Omega Investment from company materials

Financial data (full-year basis)

Unit: million yen 2014/12 2015/12 2016/12 2017/12 2018/12 2019/12 2020/12 2021/12 2022/12 2023/12 2024/12
(Income Statement)                      
Sales 102,993 106,516 101,684 108,684 118,700 122,174 116,210 115,905 123,324 132,985 138,460
Year-on-year -0.5% 3.4% -4.5% 6.9% 9.2% 2.9% -4.9% -0.3% 6.4% 7.8% 4.1%
Cost of Goods Sold 66,858 68,424 65,071 70,012 77,479 80,712 74,536 74,186 77,575 80,744 83,259
Gross Income 36,135 38,092 36,613 38,672 41,221 41,462 41,674 41,719 45,749 52,241 55,201
Gross Income Margin 35.1% 35.8% 36.0% 35.6% 34.7% 33.9% 35.9% 36.0% 37.1% 39.3% 39.9%
SG&A Expense 33,711 33,949 33,862 35,761 39,336 40,776 40,089 39,158 41,167 43,717 45,123
EBIT (Operating Income) 2,424 4,143 2,751 2,911 1,885 686 1,585 2,561 4,582 8,524 10,078
Year-on-year -40.5% 70.9% -33.6% 5.8% -35.2% -63.6% 131.0% 61.6% 78.9% 86.0% 18.2%
Operating Income Margin 2.4% 3.9% 2.7% 2.7% 1.6% 0.6% 1.4% 2.2% 3.7% 6.4% 7.3%
EBITDA 5,055 6,551 5,316 5,551 4,615 4,436 5,603 6,148 7,821 11,417 13,185
Pretax Income 3,171 4,246 2,918 3,401 3,083 938 1,277 1,523 8,372 8,378 10,071
Consolidated Net Income 2,355 4,631 1,850 2,442 1,744 -579 -355 933 5,181 5,907 7,223
Minority Interest 195 101 -56 40 19 -28 -119 -233 -113 1 39
Net Income ATOP 2,160 4,530 1,907 2,402 1,725 -550 -235 1,166 5,294 5,905 7,183
Year-on-year -44.8% 109.7% -57.9% 26.0% -28.2% -131.9% -57.3% -596.2% 354.0% 11.5% 21.6%
Net Income Margin 2.1% 4.3% 1.9% 2.2% 1.5% -0.5% -0.2% 1.0% 4.3% 4.4% 5.2%
                       
(Balance Sheet)                      
Cash & Short-Term Investments 22,132 21,533 19,839 19,977 16,529 17,030 18,246 17,451 26,976 24,795 22,482
Total assets 96,721 98,175 95,681 102,451 108,710 108,778 105,096 103,898 115,288 117,437 120,521
Total Debt 18,916 18,927 19,931 17,892 16,834 22,166 21,742 20,091 19,487 17,308 37,533
Net Debt -3,216 -2,606 92 -2,085 305 5,136 3,496 2,640 -7,489 -7,487 15,051
Total liabilities 53,532 50,864 50,275 54,997 61,200 62,940 60,901 58,818 65,374 62,434 71,174
Total Shareholders’ Equity 41,632 45,677 44,949 46,863 46,857 45,370 43,812 44,931 49,871 54,960 49,260
                       
(Cash Flow)                      
Net Operating Cash Flow 5,715 4,522 5,073 3,565 1,384 3,586 4,561 2,774 5,804 6,321 -1,000
Capital Expenditure 1,400 1,114 1,641 1,333 3,477 3,226 1,729 2,110 4,145 3,316 6,036
Net Investing Cash Flow -1,742 -803 -4,044 -2,971 -3,094 -3,221 -1,152 -1,170 4,923 -4,012 -7,107
Net Financing Cash Flow -2,179 -3,807 -2,571 -706 -2,463 0 -2,267 -2,658 -1,426 -4,148 5,905
Free Cash Flow 4,315 3,408 3,664 2,342 -1,924 635 2,832 664 1,659 3,005 -4,146
                       
(Profitability %)                      
ROA 2.25 4.65 1.97 2.42 1.63 -0.51 -0.22 1.12 4.83 5.08 6.04
ROE 5.22 10.38 4.21 5.23 3.68 -1.19 -0.53 2.63 11.17 11.27 13.79
(Per-share) Unit: JPY                      
EPS 42.8 91.6 40.1 52.7 37.8 -12.1 -5.2 25.8 117.0 130.3 147.0
BPS 825.8 953.5 986.8 1,028.9 1,027.4 995.8 970.4 993.9 1,101.3 1,212.0 1,001.1
Dividend per Share 13.00 13.00 13.00 13.00 13.00 13.00 13.00 15.00 37.00 42.00 55.00
Shares Outstanding (milion shrs) 52.14 52.14 52.14 52.14 45.61 45.66 45.66 45.66 45.66 45.66 53.38

Source: Omega Investment from company materials

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