| Metric | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥2907.7B | ¥2639.7B | +10.2% |
| Operating Income | ¥148.1B | ¥134.7B | +10.0% |
| Ordinary Income | ¥148.8B | ¥138.3B | +7.6% |
| Net Income | ¥84.7B | ¥74.8B | +13.3% |
| ROE | 14.2% | 12.0% | - |
FY2026 results achieved revenue of ¥2907.7B (vs prior year +268.0B, +10.2%), Operating Income ¥148.1B (vs prior year +13.4B, +10.0%), Ordinary Income ¥148.8B (vs prior year +10.5B, +7.6%), and Net Income ¥84.7B (vs prior year +9.9B, +13.3%), reflecting year-over-year top-line and bottom-line growth. Revenue was driven by the Pharmaceutical segment’s +25.8% growth, while Operating Income benefited from a 0.7pt improvement in SG&A ratio that converted revenue expansion into operating profit. Net Income rose +13.3% due to the absence of prior-year one-off factors and profit growth; Net Income attributable to owners of the parent was ¥74.1B (vs prior year +43.5%), a substantial increase despite goodwill amortization burden. Gross margin declined to 14.1% (‑0.7pt YoY), but compression of SG&A to 9.0% maintained an Operating Margin of 5.1% broadly unchanged.
[Revenue] Revenue ¥2907.7B (vs prior year +268.0B, +10.2%) was primarily driven by the Pharmaceutical segment’s +25.8% growth (Sales ¥990.1B, +203.1B). The core Health Insurance Pharmacy segment expanded steadily to Sales ¥1775.9B (+3.4%, +58.3B), and the BPO segment modestly increased to ¥157.4B (+5.8%, +8.6B). Company-wide revenue mix: Health Insurance Pharmacy 60.7%, Pharmaceutical 34.0%, BPO 5.4%, with Pharmaceutical and Health Insurance Pharmacy accounting for 94.7% of total. Gross profit was ¥409.0B (Gross Margin 14.1%), down 0.7pt from 14.8% a year earlier. The gross margin decline is likely attributable to higher procurement costs and product mix changes (rising share of lower-margin Pharmaceutical).
[Profitability] From Gross Profit ¥409.0B, SG&A of ¥260.9B (SG&A ratio 9.0%) was deducted to record Operating Income ¥148.1B (Operating Margin 5.1%). SG&A ratio improved 0.7pt from 9.7% a year earlier, producing positive operating leverage by restraining SG&A growth (+1.9%) versus revenue growth (+10.2%). SG&A includes goodwill amortization of ¥42.2B; on an EBITDA basis, EBITDA was ¥204.0B (Operating Income + Depreciation ¥55.9B + Goodwill Amortization ¥42.2B). Non-operating items were net positive ¥0.7B (Non-operating income ¥7.5B, Non-operating expenses ¥6.9B), yielding Ordinary Income ¥148.8B (Ordinary Margin 5.1%). Extraordinary items were net ‑¥5.0B (Extraordinary income ¥0.8B — gain on sale of fixed assets ¥0.7B, etc.; Extraordinary loss ¥5.8B — impairment loss ¥3.9B, loss on disposal of fixed assets ¥1.2B, etc.), giving Profit before Tax ¥143.8B. After deducting Income Taxes ¥59.1B (effective tax rate 41.1%) and minority interests Net Income attributable to owners of the parent was ¥74.1B. In conclusion, high Pharmaceutical growth and SG&A efficiency delivered revenue and profit growth.
The BPO segment recorded Sales ¥157.4B (+5.8% YoY), Operating Income ¥19.0B (+11.3%), and Operating Margin 12.1%, maintaining the company’s highest profitability. The Health Insurance Pharmacy segment recorded Sales ¥1775.9B (+3.4%), Operating Income ¥97.3B (‑3.0%), and Operating Margin 5.5%, showing revenue growth but profit decline, likely pressured by drug price revisions and dispensing fee revisions. The Pharmaceutical segment achieved Sales ¥990.1B (+25.8%), Operating Income ¥69.6B (+32.0%), and Operating Margin 7.0%, delivering high growth and profit expansion and becoming the primary profit driver, generating roughly 47% of total operating income. While BPO’s high profitability (12.1%) stands out, the core Health Insurance Pharmacy’s 5.5% margin sets a floor for the group margin. Expansion of the Pharmaceutical segment drove company growth but its relatively lower gross margin may have contributed to the company-wide 0.7pt gross margin decline.
[Profitability] Operating Margin 5.1% was broadly flat YoY, with a Gross Margin decline to 14.1% (‑0.7pt YoY) offset by SG&A efficiency to 9.0% (‑0.7pt YoY). ROE of 14.2% is a healthy level, decomposed into Net Profit Margin 2.9%, Total Asset Turnover 1.84x, and Financial Leverage 2.65x. Operating Cash Flow margin is 6.4% (OCF ¥186.7B / Revenue ¥2907.7B), and EBITDA margin is 7.0% (EBITDA ¥204.0B / Revenue), indicating strong cash generation. [Cash Quality] OCF / Net Income is 2.20x, indicating strong cash backing of profits. OCF / EBITDA is 0.91x, and the accrual ratio is ‑5.8% ((Net Income − OCF) / Total Assets), indicating cash-driven earnings. FCF ¥95.8B sufficiently covers Dividends ¥15.0B and CAPEX ¥16.8B, with FCF Coverage of 4.92x (FCF / (Dividends + CAPEX)). [Investment Efficiency] Total Asset Turnover at 1.84x is efficient, EPS ¥197.35 (vs prior year +43.0%) saw a large increase. CAPEX / Depreciation ratio is 0.30x, indicating restrained investment and potential need to strengthen mid-to-long-term growth foundations. EBITDA before goodwill amortization is ¥204.0B, and goodwill amortization burden reduces EBIT-level profit by 20.7%. [Financial Soundness] Equity Ratio 37.8%, Debt/Equity 0.49x, Net Debt/EBITDA 0.43x — leverage is within a healthy range. Current Ratio is 77.9% (<1.0), with Current Assets ¥592.8B versus Short-term Liabilities ¥761.3B indicating a maturity mismatch; however, Cash ¥214.0B and stable OCF limit short-term liquidity risk. Interest Coverage is 40.5x (EBIT ¥148.1B / Interest Expense ¥3.7B), showing minor interest burden.
OCF was ¥186.7B (vs prior year +48.2%, +60.7B), a large increase producing cash equal to 2.20x Net Income ¥84.7B. Operating cash flow subtotal (before working capital changes) was ¥237.1B, supported by non-cash expenses Depreciation ¥55.9B and Goodwill Amortization ¥42.2B. In working capital, Trade Receivables increased ¥43.8B and Inventories increased ¥9.1B, partially offset by an increase in Trade Payables ¥18.5B. After paying Income Taxes ¥47.4B, OCF totaled ¥186.7B. Investing Cash Flow was ‑¥90.9B, reflecting CAPEX ¥16.8B and intangible asset acquisitions ¥63.8B (mainly software), partly offset by ¥4.0B proceeds from business transfers. Financing Cash Flow was ‑¥149.7B, driven by long-term debt repayments ¥95.3B and dividend payments ¥15.0B; net reduction of short-term borrowings ¥25.0B and dividends to non-controlling interests ¥20.1B were also cash outflows. Free Cash Flow was ¥95.8B (OCF − Investing CF), covering Dividends ¥15.0B and CAPEX ¥16.8B (total ¥31.8B) by 3.0x, with the remainder used for debt repayment and cash accumulation. Cash and Deposits were ¥214.0B, down ¥53.3B YoY, but liquidity remains adequate after debt repayments and investment spending.
Of Ordinary Income ¥148.8B, Operating Income ¥148.1B constituted the bulk, and non-operating items were net +¥0.7B, limited in scale. Non-operating income ¥7.5B includes interest/dividend income ¥0.6B and subsidies ¥0.7B, etc., while non-operating expenses ¥6.9B include interest expense ¥3.7B and fees ¥0.9B, etc.; each is 0.1–0.3% of revenue, indicating low reliance on non-recurring items. Extraordinary items were net ‑¥5.0B, with impairment loss ¥3.9B and loss on disposal of fixed assets ¥1.2B as temporary profit-reducing factors, though the impact on total profits was modest. OCF ¥186.7B / Net Income ¥84.7B = 2.20x and accrual ratio ‑5.8% indicate high cash backing of profits and alignment between accounting earnings and cash generation. The gap between Ordinary Income ¥148.8B and Net Income ¥84.7B is mainly due to Income Taxes ¥59.1B (effective tax rate 41.1%) and Net Income attributable to non-controlling interests ¥10.6B, reflecting structural tax burden and ownership mix rather than one-off items. Goodwill amortization ¥42.2B is a JGAAP-specific non-cash expense; comparisons with IFRS are best made on an EBITDA-before-goodwill-amortization basis. Overall, recurring earnings make up the majority of profits, one-off effects are limited, and OCF materially exceeds accounting profits, indicating high quality of earnings.
Full-year guidance calls for Revenue ¥3150.0B (vs prior year +8.3%), Operating Income ¥165.0B (vs prior year +11.4%), Ordinary Income ¥165.0B (vs prior year +10.9%), and Net Income attributable to owners of the parent ¥78.0B. Actuals to date — Revenue ¥2907.7B, Operating Income ¥148.1B, Ordinary Income ¥148.8B — represent 92.3%, 89.8%, and 90.2% progress toward full-year targets, respectively. Operating Income progress is somewhat lagging, likely due to margin pressure in the core Health Insurance Pharmacy segment and an unexpected 0.7pt decline in gross margin. If Pharmaceutical’s high growth continues into the second half, recovery is possible, but the trend in gross margin and impacts from drug price and dispensing fee revisions should be monitored carefully. Dividend guidance is annual ¥27 (including interim dividend realized ¥23), implying a projected Payout Ratio of 24.6%, a sustainable level.
Annual dividend is Interim ¥23 and Year-end forecast ¥27, totaling ¥50, and the Payout Ratio is 24.6% (Annual Dividend ¥50 / Forecast EPS ¥207.76), a sustainable level. Prior year annual dividend was ¥50 (including interim ¥17 and adjusted year-end ¥33) with a Payout Ratio of 24.6%; dividend level is maintained. Share buybacks were small at ¥2.3B, with the company continuing a dividend-centered shareholder return policy. With FCF ¥95.8B versus cash dividends ¥15.0B, FCF Coverage is 4.92x, indicating ample room. Given Cash and Deposits ¥214.0B, stable OCF ¥186.7B, and Debt/Equity 0.49x, maintaining the current dividend policy is feasible. There is scope for dividend increase based on Payout Ratio and FCF, but near-term priority is likely on business investment and preserving financial soundness.
Gross Margin Decline Risk: Gross Margin at 14.1% declined 0.7pt YoY, attributable to higher procurement costs and mix shift (increased share of lower‑margin Pharmaceutical). Further deterioration due to procurement environment or drug price revisions could make maintaining Operating Margin 5.1% difficult; if SG&A efficiency cannot be further improved, margins may deteriorate. Downward pressure from the Health Insurance Pharmacy segment’s Operating Margin of 5.5% may persist.
Short-term Liquidity Risk: Current Ratio 77.9% is below 1.0, with Current Assets ¥592.8B vs Short-term Liabilities ¥761.3B indicating a maturity mismatch. While Cash ¥214.0B and stable OCF secure near-term liquidity, deterioration in credit conditions or delays in receivables collection could pressure short-term funding. Refinance risk on short-term borrowings of ¥110.0B and cost increases in a rising interest rate environment are potential concerns.
Goodwill & Intangible Asset Risk: Goodwill ¥364.2B accounts for 60.9% of Net Assets ¥598.4B, and Intangible Assets ¥699.6B account for 44.2% of Total Assets ¥1581.2B, indicating high dependence on M&A-derived intangibles. If business conditions deteriorate or profitability weakens due to drug price or dispensing fee revisions, impairment losses on goodwill and intangibles may materialize. The company recorded impairment losses ¥3.9B this period; combined with annual goodwill amortization (¥42.2B), these are structural factors compressing profit.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 5.1% | 4.6% (1.7%–8.2%) | +0.5pt |
| Net Profit Margin | 2.9% | 3.3% (0.9%–5.8%) | -0.4pt |
Operating Margin is +0.5pt above the retail industry median, reflecting SG&A efficiency and contributions from high-margin BPO and Pharmaceutical segments. Net Profit Margin is ‑0.4pt below the median, compressed by high tax burden (effective tax rate 41.1%) and goodwill amortization.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 10.2% | 4.3% (2.2%–13.0%) | +5.9pt |
Revenue growth outperforms the retail industry median by +5.9pt, led by the high growth of the Pharmaceutical segment. Both existing stores and M&A appear to be contributors to growth.
※ Source: Company compilation
The Pharmaceutical segment’s high growth (Sales +25.8%, Operating Income +32.0%) drove overall company growth; future sustainability depends on order trends and customer base expansion in this segment. The BPO segment maintains high profitability (Operating Margin 12.1%), and expansion of both segments is key to improving company margins. Conversely, the core Health Insurance Pharmacy segment showed revenue growth but profit decline (Operating Margin 5.5%) and is structurally sensitive to drug price and dispensing fee revisions; progress on margin-improvement measures (existing-store efficiency, strengthening prescription capture) should be monitored.
Strong cash generation (OCF ¥186.7B, OCF/Net Income 2.20x, FCF ¥95.8B) provides ample coverage for Dividends ¥15.0B and CAPEX ¥16.8B. However, with CAPEX / Depreciation at 0.30x indicating restrained investment, balancing expansion of IT infrastructure, store renewal, and intangible investments with growth investments is a focus for maintaining competitiveness. With Current Ratio 77.9% and a maturity mismatch, working capital management (receivables and inventory turnover) and refinancing of short-term borrowings are short-term risk monitoring items. High dependence on goodwill ¥364.2B (60.9% of Net Assets) and intangible assets ¥699.6B (44.2% of Total Assets) entails impairment risk; valuation on an EBITDA-before-goodwill-amortization basis is an important perspective for investment decisions.
This report was automatically generated by AI analyzing XBRL financial statement data. It is not a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the company based on public financial statements. Investment decisions are your own responsibility; consult a professional if necessary.