2503 · Kirin Holdings

Will it survive?

• Can it pay its interest? 19.0×
  Comfortable
  Operating income ¥209.7B ÷ interest expense ¥11.0B
  What this means

  Operating profit covers interest with the kind of margin Graham wanted for a defensive holding. Necessary, not sufficient, it says solvent, not cheap.

• How heavy is the debt, net of cash? ¥798.1B · 3.8× operating profit
  Meaningful net debt
  Cash ¥125.3B − debt ¥923.4B
  What this means

  Netting ¥125.3B of cash and short-term investments against ¥923.4B of debt leaves ¥798.1B owed, about 3.8× a year's operating profit (4.4× on the gross debt, before the cash). Net debt is the leverage figure that matters: the cash is already set against the debt. Strategic or illiquid investments aren't counted here.

• How long is cash tied up? -29d
  Negative, funded by others
  DSO 80 + DIO 0 − DPO 109 days
  What this means

  Days cash is tied up between paying suppliers and collecting from customers. A negative cycle is a quiet moat: suppliers and customers fund the operation (Buffett's “float”), the company grows on other people's money. (Little or no inventory, a services / asset-light model, so the inventory leg is ~0.)

Is it a good business?

• Return on invested capital 5%
  Below average through the cycle
  10-yr median, range 3%–14%; 8% latest = NOPAT ¥165.6B ÷ invested capital ¥2.09T
  Industry peers: median 16%
  What this means

  The rate the business earns on the money tied up in it, Buffett's north star, because over time a stock tracks the ROIC beneath it. Above ~15% sustained hints at a moat; a return below the cost of capital (~8%) erodes value as a business grows rather than building it — the test Buffett weighs most. The headline is the median of the last 10 years (it ran 8% most recently), so one peak or trough year doesn't set the verdict. Asset-light businesses (R&D expensed, little capital) read artificially high, pair this with Owner Earnings.

• Owner-earnings margin 5%
  Solid through the cycle
  8-yr median margin, range 2%–8%; latest ¥193.6B = operating cash ¥295.4B − maintenance capex ¥101.8B
  Industry peers: median 2%
  What this means

  What an owner could take out without starving the business: operating cash less the maintenance capital it must spend to hold its position — Buffett's owner earnings. That's 8% of revenue this year, a 5% median across 8 years. It chose to put ¥73.7B more into growth, so free cash flow this year was ¥119.8B — the gap is investment, not weakness.

• Are earnings backed by cash? 2.00×
  Cash-backed
  Cash from ops ¥295.4B ÷ net income ¥147.5B
  What this means

  How much of reported profit showed up as operating cash. Above 1× is reassuring; well below suggests earnings lean on accruals. One year is noisy, growth and working-capital swings distort it, and this is operating cash, not free cash. Watch the multi-year trend.

How is the cash used?

• Where do the earnings go? 30%
  Reinvests most of it
  Dividends + buybacks ¥58.7B ÷ Owner Earnings ¥193.6B
  What this means

  Of ¥193.6B Owner Earnings, ¥58.7B (30%) went back to shareholders, ¥58.7B dividends, ¥19M buybacks. Returning most of it is the mark of a mature business with little left to reinvest at a high return; reinvesting most could mean a long runway, or empire-building. The split doesn't say which; the return earned on it (see ROIC) does.

• Investing or harvesting? 1.72×
  Expanding
  Capex ¥175.6B ÷ depreciation ¥101.8B
  What this means

  Descriptive, not a grade. Above ~1× means investing faster than assets wear out (growth, or, sustained for years, today's earnings carrying less depreciation than tomorrow's will). Below means spending less than it's wearing out (efficiency, or a melting asset base). The ratio won't tell you which; the filings will.

Durability & moat, 2016–2025

Whether the record’s returns held, and what the capital reinvested earned.

• Profitable years 10 of 10
  What this means

  Never lost money over the record, the earnings stability Graham insisted on.

• Return on capital ≥ 15% 0 of 10 yrs
  What this means

  A moat shows up as a high return on invested capital that holds year after year, not one good vintage.

• Operating margin 6% → 7% (3-yr avg ends)
  What this means

  Through the cycle the operating margin widened — about 6% early to 7% lately, median 5% — pricing power intact or improving.

• Reinvestment, incremental ROIC 9%
  What this means

  Reinvested capital came back at only a modest incremental return — near the cost of capital, where extra growth adds little per dollar. The record shows whether it is a soft stretch or a thinning moat.

• Owner earnings growth +7%/yr
  What this means

  Owner earnings grew about 7% a year over the record.

• Worst year 2016 · 3.7% op. margin
  What this means

  Stayed profitable even in its hardest year, the resilience that survives recessions.

• Share count +0.0%/yr
  What this means

  Roughly flat share count, little dilution, little buyback.

• Dividend record rising
  What this means

  Paid and raised the dividend across the record, the continuity Graham prized.