9532 · Osaka Gas

Will it survive?

• Can it pay its interest? 12.7×
  Comfortable
  Operating income ¥174.8B ÷ interest expense ¥13.8B
  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? ¥1.08T · 6.2× operating profit
  Heavy net debt
  Cash ¥58.5B − debt ¥1.14T
  What this means

  Netting ¥58.5B of cash and short-term investments against ¥1.14T of debt leaves ¥1.08T owed, about 6.2× a year's operating profit (6.5× 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? 83d
  Long (60+ days)
  DSO 53 + DIO 51 − DPO 22 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 2%–6%; 6% latest = NOPAT ¥138.1B ÷ invested capital ¥2.43T
  Industry peers: median 7%
  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 6% 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 7%
  Solid through the cycle
  10-yr median margin, range -4%–10%; latest ¥205.6B = operating cash ¥340.7B − maintenance capex ¥135.1B
  Industry peers: median 7%
  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 10% of revenue this year, a 7% median across 10 years. It chose to put ¥103.4B more into growth, so free cash flow this year was ¥102.2B — the gap is investment, not weakness.

• Are earnings backed by cash? 2.23×
  Cash-backed
  Cash from ops ¥340.7B ÷ net income ¥152.8B
  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? 51%
  Returns about half
  Dividends + buybacks ¥105.8B ÷ Owner Earnings ¥205.6B
  What this means

  Of ¥205.6B Owner Earnings, ¥105.8B (51%) went back to shareholders, ¥42.2B dividends, ¥63.5B 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? 1.77×
  Expanding
  Capex ¥238.5B ÷ depreciation ¥135.1B
  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 6% → 8% (3-yr avg ends)
  What this means

  Through the cycle the operating margin widened — about 6% early to 8% lately, median 6% — pricing power intact or improving.

• Reinvestment, incremental ROIC 6%
  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 +9%/yr
  What this means

  Owner earnings grew about 9% a year over the record.

• Worst year 2023 · 2.6% 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.