7911 · TOPPAN Holdings

Will it survive?

• Can it pay its interest? 7.6×
  Comfortable
  Operating income ¥67.1B ÷ interest expense ¥8.9B
  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? ¥108.6B · 1.6× operating profit
  Modest net debt
  Cash ¥411.2B + ST investments ¥2.5B − debt ¥522.2B
  What this means

  Netting ¥413.7B of cash and short-term investments against ¥522.2B of debt leaves ¥108.6B owed, about 1.6× a year's operating profit (7.8× 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? 80d
  Long (60+ days)
  DSO 97 + DIO 21 − DPO 38 days
  What this means

  Days cash is tied up between paying suppliers and collecting from customers. Lower is better; a long cycle means growth itself eats cash.

Is it a good business?

• Return on invested capital 5%
  Below average through the cycle
  10-yr median, range 3%–8%; 4% latest = NOPAT ¥53.0B ÷ invested capital ¥1.28T
  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 4% 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 1%
  Thin through the cycle
  10-yr median margin, range -1%–4%; latest ¥6.9B = operating cash ¥86.1B − maintenance capex ¥79.2B
  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 0% of revenue this year, a 1% median across 10 years. It chose to put ¥49.6B more into growth, so free cash flow this year was (¥42.7B) — the gap is investment, not weakness.

• Are earnings backed by cash? 1.33×
  Cash-backed
  Cash from ops ¥86.1B ÷ net income ¥64.8B
  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? 688%
  Returned more than it generated
  Dividends + buybacks ¥47.5B ÷ Owner Earnings ¥6.9B
  What this means

  The company returned more than it generated: against ¥6.9B of Owner Earnings, ¥47.5B (688%) went back to shareholders, ¥17.4B dividends, ¥30.0B buybacks — the excess came from the balance sheet or borrowing, not the year's operations. Sustained, that pattern draws down cash or adds debt; the net-debt line above shows where it stands.

• Investing or harvesting? 1.63×
  Expanding
  Capex ¥128.8B ÷ depreciation ¥79.2B
  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, 2017–2026

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 3% → 4% (3-yr avg ends)
  What this means

  Through the cycle the operating margin widened — about 3% early to 4% lately, median 4% — pricing power intact or improving.

• Reinvestment, incremental ROIC returns capital
  What this means

  The capital base barely grew: this business returns cash through dividends and buybacks rather than reinvesting. Judge it on the cash returned, not on compounding.

• Worst year 2019 · 3.1% op. margin
  What this means

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

• Dividend record rising
  What this means

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