| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥31040.6B | ¥29610.5B | +4.8% |
| Operating Income / Operating Profit | ¥361.6B | ¥380.8B | -5.0% |
| Equity-Method Investment Gains/Losses | - | - | - |
| Ordinary Income | ¥386.3B | ¥404.9B | -4.6% |
| Net Income / Net Profit | ¥167.7B | ¥183.8B | -8.7% |
| ROE | 3.3% | 3.8% | - |
For the fiscal year ended March 2026, Revenue was ¥31040.6B (YoY +¥1430.1B +4.8%), Operating Income was ¥361.6B (YoY -¥19.2B -5.0%), Ordinary Income was ¥386.3B (YoY -¥18.6B -4.6%), and Net Income attributable to owners of the parent was ¥417.5B (YoY +¥143.7B +52.4%). Under a revenue-increase but operating-profit-decrease structure, final profit increased significantly due to the recording of Extraordinary Income of ¥253.4B, mainly consisting of Gain on Sales of Investment Securities of ¥253.3B. Gross profit margin was 7.0%, down 0.2ppt from 7.2% a year earlier; SG&A ratio was 5.9%, essentially flat from 5.9% a year earlier, but SG&A rose by +3.3% in absolute terms against sales growth of +4.8%, leading Operating Margin to deteriorate 0.1ppt to 1.2% from 1.3% a year earlier. Non-operating income of ¥36.9B (including dividend income of ¥18.6B) provided support at the ordinary-income stage but was insufficient to offset weakness in the operating base. Operating Cash Flow (OCF) was ¥385.7B, a large improvement of +583.9% YoY, absorbing working capital movements (Accounts Receivable increase -¥376.9B, Inventories increase -¥51.8B offset by Accounts Payable increase +¥471.0B) and securing Free Cash Flow of ¥298.4B.
[Revenue] Revenue was ¥31040.6B (YoY +4.8%), achieving steady top-line growth. By segment, Prescription Pharmaceutical Wholesale (Medical Pharmaceuticals, etc.) was ¥27825.8B (+5.4%), accounting for 89.6% of total revenue, supported by volume growth in prescription pharmaceuticals and the impact of drug price revisions. Self-Medication Wholesale was ¥2670.7B (+0.5%), a marginal increase, Manufacturing was ¥521.8B (-3.5%), a decline, and Medical-Related was ¥371.7B (+0.4%), essentially flat. While the core Prescription Pharmaceutical Wholesale led growth, the Manufacturing segment saw declines caused by demand fluctuations for APIs and reagents, revealing a concentration in the business portfolio.
[Profitability] Cost of sales was ¥28861.8B, resulting in Gross Profit of ¥2178.8B (Gross Margin 7.0%), a 0.2ppt decline YoY. SG&A was ¥1817.2B (SG&A ratio 5.9%), up +3.3% from ¥1758.5B a year earlier, leading to Operating Income of ¥361.6B (Operating Margin 1.2%), down -5.0% YoY. Increases in logistics costs, personnel expenses, and system investments compounded the decline in gross margin and pressured profitability. Adding Non-operating Income of ¥36.9B (Dividend Income ¥18.6B, Other ¥9.8B) and Non-operating Expenses of ¥12.2B (including Interest Expense ¥3.5B) produced Ordinary Income of ¥386.3B (-4.6%). Extraordinary Income totaled ¥253.4B, centered on Gain on Sales of Investment Securities ¥253.3B; Extraordinary Losses totaled ¥19.7B (Impairment Losses ¥2.9B, Loss on Disposal of Fixed Assets ¥2.9B, Loss on Valuation of Investment Securities ¥12.7B, etc.), lifting Profit before Income Taxes to ¥620.1B. After deducting Income Taxes of ¥201.8B and Non-controlling Interests of ¥0.8B, Net Income attributable to owners of the parent was ¥417.5B (+52.4%). In summary, despite revenue growth with operating-stage profit decline, Extraordinary Income drove a large increase in final profit.
Prescription Pharmaceutical Wholesale (Medical Pharmaceuticals, etc.) reported Revenue of ¥27825.8B (+5.4%), Operating Income ¥333.0B (+0.7%), Operating Margin 1.2%, accounting for 92.1% of consolidated Operating Income as the core business. Revenue growth was secured on the back of stable volume expansion, but profit margins remained flat due to drug price revisions and pressure to correct distribution practices. Manufacturing reported Revenue ¥521.8B (-3.5%), Operating Income ¥12.0B (-7.0%), Operating Margin 2.3%, with declines driven by demand fluctuations for APIs and reagents. Self-Medication Wholesale reported Revenue ¥2670.7B (+0.5%), Operating Income ¥30.1B (+2.1%), Operating Margin 1.1%; OTC demand is firm but growth is limited. Medical-Related reported Revenue ¥371.7B (+0.4%), Operating Income ¥5.0B (-16.3%), Operating Margin 1.3%, with notable deterioration in profitability at dispensing pharmacies and similar businesses.
[Profitability] Operating Margin of 1.2% declined 0.1ppt from 1.3% a year earlier, and under Gross Margin 7.0% (down 0.2ppt from 7.2%) and SG&A ratio 5.9% (essentially unchanged from 5.9%) the low-margin profile persists. ROE 8.4% improved 2.7ppt from 5.7% a year earlier, but much of the improvement was driven temporarily by Extraordinary Income, limiting sustainability. ROA 2.8% was essentially flat from 2.8% a year earlier. [Cash Quality] OCF/Net Income ratio was 0.92x, somewhat low vs. Net Income, with increases in working capital (Accounts Receivable -¥376.9B, Inventories -¥51.8B) dragging on cash, while Accounts Payable increase +¥471.0B provided support. Days Sales Outstanding (DSO) was approximately 79 days, slightly up from ~78 days a year earlier, indicating room to improve working capital management. [Investment Efficiency] Capital Expenditure was ¥224.6B and Depreciation ¥146.5B, yielding a CapEx/Depreciation multiple of 1.53x, reflecting continued active investment in logistics hubs and digital infrastructure. Total Asset Turnover was 2.06x, reflecting the high-turnover model of pharmaceutical wholesale. [Financial Soundness] Equity Ratio was 33.7%, slightly up from 33.5% a year earlier; Current Ratio 123.5%, Quick Ratio 106.3%, indicating acceptable short-term liquidity. Interest-bearing debt totaled ¥300.0B (Corporate Bonds ¥200.0B and Long-term Borrowings ¥100.0B), effectively close to net debt-free, with Debt/EBITDA 0.20x and Interest Coverage 102x, indicating very strong financial resilience. Goodwill balance was ¥10.0B (0.2% of equity), indicating minor M&A risk.
OCF was ¥385.7B, a significant YoY improvement of +583.9%, resulting after subtracting working capital movements and income taxes from OCF subtotal before working capital fluctuations of ¥496.9B. Accounts Receivable increase -¥376.9B and Inventories increase -¥51.8B were cash outflows, while Accounts Payable increase +¥471.0B provided substantial support, highlighting dependence on supplier credit. Income Taxes Paid were -¥130.1B. Investing Cash Flow was -¥87.2B: CapEx -¥224.6B (focused on logistics hubs and systems) was more than offset by Proceeds from Sales of Investment Securities of ¥309.2B, resulting in net cash inflow. Free Cash Flow was ¥298.4B, which covered Dividends Paid -¥120.3B and Share Repurchases -¥6.4B and left a surplus. Financing Cash Flow was -¥140.5B, mainly due to dividend and share buyback outflows. Cash and Deposits were ¥1930.7B, up ¥159.8B from ¥1770.9B a year earlier, supporting a stable financial base. The ongoing trend of rising working capital suppressing OCF generation remains, but support from Accounts Payable increases and investing CF improvement due to Extraordinary Income provided overall liquidity cushion.
Against Ordinary Income of ¥386.3B, Extraordinary Income of ¥253.4B (mostly Gain on Sales of Investment Securities ¥253.3B) pushed Profit before Income Taxes up to ¥620.1B, meaning approximately 60% of Net Income attributable to owners of the parent ¥417.5B depends on one-time factors. Of Non-operating Income ¥36.9B, Dividend Income ¥18.6B is recurring in nature, but the composition of Other Non-operating Income ¥9.8B is unclear. Comprehensive Income ¥392.6B far exceeds Net Income ¥167.7B, with Other Comprehensive Income ¥224.9B recorded, though detailed composition is not confirmable from disclosed data. OCF ¥385.7B was 0.92x of Net Income and generally aligned, but working capital increases (Accounts Receivable -¥376.9B, Inventories -¥51.8B) were absorbed by Accounts Payable increase +¥471.0B, indicating high dependence on supplier credit. Ordinary-stage profits modestly declined, reflecting weaknesses in the operating base; sustainable earnings quality requires improvement at the operating stage.
For the fiscal year ending March 2027, management forecasts Revenue ¥31440.0B (YoY +1.3%), Operating Income ¥339.0B (-6.3%), Ordinary Income ¥366.0B (-5.3%), and Net Income attributable to owners of the parent ¥208.0B (-50.2%). Assuming the lapse of this period’s Extraordinary Income, Final Profit is expected to decline significantly, with EPS forecast at ¥116.47, about half of the current-period EPS ¥229.64. Dividends are forecast at ¥35 per annum, a cut from the current ¥68, but the Payout Ratio forecast of 30.0% relative to Net Income is within a reasonable range. The projected declines in Operating and Ordinary Income likely reflect conservative assumptions incorporating continued drug price revisions, distribution correction pressures, and ongoing increases in logistics and personnel costs, indicating that improving operating-stage profitability remains a key challenge. Revenue is expected to remain resilient at +1.3% driven by volume growth in Prescription Pharmaceutical Wholesale.
Annual dividend is ¥68 (interim ¥34, year-end ¥34) with total dividends of approximately ¥116.4B. Payout Ratio is 27.9%, conservative even relative to Net Income attributable to owners of the parent ¥417.5B including Extraordinary Income. Dividend coverage by FCF of ¥298.4B is 2.57x, indicating ample cushion; combined with Share Repurchases ¥6.4B, total shareholder returns amount to approximately ¥122.8B, and Total Return Ratio is 29.4%. Next fiscal year’s forecast dividend is ¥35 (a cut from current year), but with forecast Net Income ¥208.0B a Payout Ratio of 30.0% is maintained and sustainability is high. Forecast total dividends of approximately ¥63.5B (on a next-year basis) are expected to be well below FCF, suggesting sufficient return capacity even after the lapse of Extraordinary Income.
Margin pressure from drug price revisions and distribution correction: With Operating Margin at 1.2% and Gross Margin 7.0% down 0.2ppt YoY, the business structure is concentrated (Prescription Pharmaceutical Wholesale accounts for 89.6% of revenue and 92.1% of operating income). Drug price revisions and corrections to distribution practices pose structural downside risk to profitability. Maintaining SG&A ratio at 5.9% is already challenging; continued logistics and personnel cost increases could lead to operating-stage losses.
Liquidity pressure from expanding working capital: DSO approximately 79 days and Accounts Receivable elongation, together with Inventory increase -¥51.8B, expand working capital. Of OCF ¥385.7B, Accounts Payable increase +¥471.0B provided significant support, indicating rising dependence on supplier credit. If this trend continues during growth phases, deterioration in payment terms and counterparty credit risk could materialize.
Volatility of final profit due to lapse of Extraordinary Income: Of Net Income attributable to owners of the parent ¥417.5B, approximately ¥253.3B was Gain on Sales of Investment Securities, a one-off. Next-year forecast of ¥208.0B (about half) underscores low stability of final profit relative to operating-stage earnings (Ordinary Income forecast ¥366.0B). The occurrence or absence of Extraordinary Gains/Losses can materially affect shareholder returns and investment capacity.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 1.2% | 3.4% (1.4%–5.0%) | -2.2pt |
| Net Margin | 0.5% | 2.3% (1.0%–4.6%) | -1.8pt |
Both Operating Margin and Net Margin are well below industry medians, underscoring relatively pronounced low-margin characteristics within pharmaceutical wholesale.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 4.8% | 5.9% (0.4%–10.7%) | -1.1pt |
Revenue growth is slightly below the median but close, placing the company at a standard growth pace within the industry.
※Source: Company compilations
Urgent need to improve operating-stage profitability: Operating Margin 1.2% is substantially below industry median 3.4%; declines in Gross Margin to 7.0% and rises in SG&A are preventing operating leverage. Under continued drug price revisions and distribution correction pressure, cost optimization (logistics efficiency, digital utilization) and strengthening pricing negotiation power are essential to lift operating-stage performance. The next-year forecast anticipates Operating Income -6.3%, implying limited short-term improvement, making the progress of structural reforms under the medium-term plan a key point of interest.
Improve working capital management and cash generation: With DSO approx. 79 days and inventory increases expanding working capital, the current structure relying on Accounts Payable increase +¥471.0B to support OCF ¥385.7B is vulnerable to payment-term negotiations and counterparty credit risk. Reducing DSO and improving inventory turns to raise OCF/EBITDA (current period 0.76x) would expand investment and return capacity.
Sustainability of returns after lapse of Extraordinary Income: Of Net Income attributable to owners of the parent ¥417.5B, approx. ¥253.3B was one-time Gain on Sales of Investment Securities. Next-year forecast Net Income ¥208.0B and dividend ¥35 (Payout Ratio 30.0%) adjust to conservative levels, and on an FCF basis return capacity is expected to be maintained. With Debt/EBITDA 0.20x and Interest Coverage 102x, financial capacity is ample; improving recurring operating performance is a prerequisite for sustainably increasing dividends and buybacks.
This report is an AI-generated earnings analysis document based on XBRL financial statement data. It is not a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the Company from publicly disclosed financial statements. Investment decisions should be made at your own responsibility and, if necessary, after consulting an expert.