Alfresa Holdings Corporation FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.53T
• Operating Income: ¥16.21B
• Net Income: ¥13.77B
• EPS: ¥63.35

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend Information

Segment Information

Full Year Forecast

Disclaimer

This data was automatically extracted from XBRL files. Please refer to the original disclosure documents for accuracy.

AI Financial Analysis

Executive Summary

Alfresa Holdings (27840) reported FY2026 Q2 consolidated results under JGAAP showing steady top-line expansion but subdued bottom-line performance and weak cash conversion. Revenue rose 5.0% YoY to ¥1,529.8bn, with gross profit of ¥102.3bn implying a gross margin of 6.7%, broadly consistent with the low-margin nature of pharmaceutical wholesale. Operating income increased 8.1% YoY to ¥16.2bn, indicating modest operating leverage as opex grew slower than gross profit. Ordinary income was ¥17.5bn, exceeding operating income by ~¥1.28bn, suggesting positive non-operating contributions despite minimal interest expense (¥0.14bn). Net income declined 18.1% YoY to ¥11.5bn, pointing to higher taxes and/or non-recurring items, as the tax expense of ¥6.9bn implies a normalized effective tax rate closer to the high-30% range, contrary to the metric table that shows 0.0% (which we treat as a data limitation). ROE calculated via DuPont is 2.36% (net margin 0.75% × asset turnover 1.019 × leverage 3.07), highlighting thin margins and low capital efficiency typical of the sector. EBITDA was ¥23.34bn (1.5% margin), and interest coverage was very strong at ~112.5x, reflecting low financial burden. The balance sheet shows total assets of ¥1,500.7bn and equity of ¥488.4bn with liabilities of ¥957.6bn (D/E 1.96x), indicating moderate leverage for a distributor. Liquidity is sound with a current ratio of 122% and a quick ratio of 105%, supported by substantial working capital of ¥199.5bn, though inventory stands at ¥157.3bn. Operating cash flow was weak at ¥2.94bn, covering only ~26% of net income, implying material working capital absorption in the half. Free cash flow cannot be reliably assessed because investing cash flow and capex were not disclosed (zero values indicate non-disclosure). DPS is reported as 0.00 and payout ratio 0.0%, but these appear to be unreported placeholders for the interim period; the company historically pays dividends, so this requires confirmation. Overall, the quarter demonstrates resilient revenue growth and stable operating execution but highlights earnings quality concerns due to low OCF conversion and a drop in net income. The financial position remains adequate with ample liquidity and strong interest cover, but return metrics are modest and dependent on operating efficiency gains. Management’s ability to control SG&A, optimize inventory/receivables, and pass through cost pressures will be key to sustaining margins. Non-operating gains helped ordinary income, but reliance on such items is not a durable driver. Given data limitations (equity ratio, cash, investing CF, share count unreported), our assessment focuses on available non-zero items and may understate or overstate certain ratios.

Profitability Analysis

ROE_decomposition: ROE 2.36% = Net margin 0.75% × Asset turnover 1.019 × Financial leverage 3.07. The low net margin is the principal drag; turnover is reasonable for a wholesaler; leverage provides modest lift. margin_quality: Gross margin 6.7% on revenue of ¥1,529.8bn and gross profit of ¥102.3bn indicates limited pricing power but stable spread. Operating margin is ~1.06% (¥16.2bn/¥1,529.8bn), up YoY with opex discipline. EBITDA margin is 1.5%, offering a thin buffer for shocks. Ordinary income exceeds operating income by ~¥1.28bn, implying non-operating tailwinds; sustainability uncertain. operating_leverage: Operating income growth (+8.1% YoY) outpaced revenue growth (+5.0% YoY), indicating some operating leverage from SG&A control and scale. However, the thin EBITDA margin limits incremental drop-through, and working-capital-intensive growth can dampen realized leverage.

Growth Assessment

revenue_sustainability: Top-line +5.0% YoY suggests steady volume growth and/or product mix tailwinds in pharmaceutical distribution. As the sector is volume-driven and price revisions are frequent, mid-single-digit growth appears sustainable if demand remains steady. profit_quality: Net income declined 18.1% YoY despite higher operating profit, implying higher tax burden and/or non-recurring factors below operating line. The OCF/Net income ratio of 0.26 signals weaker earnings quality this half due to working capital build. outlook: Near-term growth hinges on inventory and receivables normalization, execution on logistics efficiency, and managing NHI price revisions. With interest costs low and ordinary income supported by non-operating items, sustaining operating improvements is key to stabilizing bottom line.

Financial Health

liquidity: Current ratio 122.3% and quick ratio 104.7% indicate adequate short-term coverage. Working capital stands at ¥199.5bn; inventories at ¥157.3bn highlight the need for disciplined turnover management. solvency: Debt-to-equity (using total liabilities as proxy) is 1.96x; financial leverage (assets/equity) 3.07x is moderate for distribution. Interest coverage is strong at ~112.5x, supporting solvency despite thin margins. capital_structure: Equity of ¥488.4bn provides a sizable buffer; however, the reported equity ratio of 0.0% is unreported and should not be interpreted as zero. Absent detailed debt breakdown and cash balances (cash reported as 0 is non-disclosure), net leverage cannot be assessed.

Cash Flow Quality

earnings_quality: OCF of ¥2.94bn versus net income of ¥11.52bn yields OCF/NI of 0.26, indicating weak cash conversion this half, likely from working capital consumption (higher inventories/receivables tied to revenue growth). FCF_analysis: Free cash flow cannot be calculated reliably due to non-disclosure of investing cash flows/capex (reported zero). EBITDA of ¥23.34bn suggests underlying cash earnings capacity, but working capital swings dominate near-term FCF. working_capital: Inventories at ¥157.3bn and strong sales suggest elevated trade receivables (not disclosed) are probable. Focus should be on days inventory and days sales outstanding; current ratios imply liquidity is adequate, but cash generation depends on normalization.

Dividend Sustainability

payout_ratio_assessment: EPS is ¥63.35 for the half; reported DPS and payout ratio are 0.00 and 0.0%, respectively, which appear to be undisclosed rather than true zeros for the interim period. Without confirmed interim dividend, payout assessment is inconclusive. FCF_coverage: FCF not available due to capex non-disclosure. Given OCF softness (¥2.94bn), coverage in the half appears thin; full-year seasonality may improve coverage if working capital releases in H2. policy_outlook: Historically, large distributors target stable dividends; absent disclosure here, we assume continuity subject to full-year cash generation. Confirmation from company guidance is needed.

Risk Assessment

Business Risks:

• NHI drug price revisions compress gross margins
• Manufacturer rebate and discount changes affecting spreads
• Inventory obsolescence risk amid product switches and expiries
• Logistics and labor cost inflation pressuring SG&A
• Customer concentration with large hospital groups and pharmacies
• Regulatory and compliance risks in pharmaceutical distribution

Financial Risks:

• Weak OCF/NI (0.26) indicating cash conversion risk
• Working capital build increasing funding needs
• Thin EBITDA margin (1.5%) leaves limited shock absorption
• Reliance on non-operating gains to lift ordinary income
• Data limitations on cash and debt hinder net leverage assessment

Key Concerns:

• Sustainability of operating margin gains with ongoing cost inflation
• Normalization of inventories and receivables to restore cash conversion
• Potential for higher effective tax rate pressuring net income

Investment Implications

Key Takeaways:

• Revenue up 5.0% YoY with operating income up 8.1% indicates modest operating leverage
• Net income down 18.1% YoY due to below-the-line and tax factors; margin remains thin
• ROE at 2.36% constrained by 0.75% net margin; leverage offers limited uplift
• Liquidity adequate (current 122%, quick 105%) but cash conversion weak (OCF/NI 0.26)
• Interest coverage strong at 112.5x; solvency risk low despite moderate leverage

Metrics to Watch:

• OCF/NI ratio and FCF once capex is disclosed
• Inventory and receivables turnover (DIO/DSO) trends
• Gross and operating margin progression versus NHI price revisions
• Ordinary-to-operating income gap (quality and sustainability of non-operating gains)
• Effective tax rate trajectory and extraordinary items

Relative Positioning: Within Japanese pharma distribution, Alfresa exhibits typical low margins and moderate leverage with solid interest coverage; its ROE and cash conversion appear on the weaker side this half, making execution on working capital and SG&A efficiency pivotal to close gaps with best-in-class peers.

Disclaimer

This analysis was auto-generated by AI. Please note the following:

• No Guarantee of Accuracy: The accuracy and completeness of this analysis are not guaranteed. For accurate financial data, please refer to the original disclosure documents published on TDnet or other official sources
• Not Investment Advice: This analysis is for general informational purposes only and does not constitute investment advice under applicable securities laws. It is not a recommendation to buy or sell any specific securities
• At Your Own Risk: Investment decisions should be made at your own discretion and risk. We assume no liability for any losses incurred based on this analysis