Hokuyaku-Takeyama Holdings Co., Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥148.46B
• Operating Income: ¥910M
• Net Income: ¥884M
• EPS: ¥54.44

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

For FY2026 Q2 (cumulative) under JGAAP on a consolidated basis, Hokuyaku-Takeyama Holdings delivered top-line growth but experienced margin compression at the operating level, with a notable uplift at the bottom line. Revenue rose 5.1% year over year to ¥148.462 billion, consistent with steady volume expansion in a low-margin distribution model. Gross profit was ¥10.328 billion, translating to a gross margin of 7.0%, which is typical for pharmaceutical and medical distribution but leaves limited room for operating leverage. Operating income declined 15.6% YoY to ¥910 million, implying an operating margin of 0.61% and indicating cost pressures (likely SG&A/logistics) offsetting gross profit growth. Ordinary income was ¥1.304 billion, meaning non-operating contributions were positive and softened the decline seen at the operating level. Net income increased 29.4% YoY to ¥1.144 billion, aided by non-operating factors and a normalized tax burden; this divergence from operating trends highlights the need to scrutinize the sustainability of non-operating items. EPS came in at ¥54.44 for the interim period. DuPont analysis shows a net margin of 0.77%, asset turnover of 0.943x, and financial leverage of 2.49x, yielding an ROE of 1.81% on an interim basis. Liquidity appears adequate with a current ratio of 126.1% and quick ratio of 102.9%, supported by working capital of ¥21.473 billion. Capital structure is balanced with liabilities-to-equity of 1.35x and an implied equity ratio of roughly 40.2% (Total equity ¥63.346 billion / Total assets ¥157.456 billion), although the reported equity ratio field is not disclosed. Operating cash flow was ¥2.298 billion, roughly 2.0x net income, signaling solid earnings-to-cash conversion for the period. However, investing cash flow and cash balances are not disclosed, limiting free cash flow analysis despite a tabular “FCF: 0” placeholder. Dividend information is not disclosed (DPS and payout shown as zero, which should be taken as unreported), preventing an assessment of shareholder return policy in this update. Overall, the company exhibits resilient top-line growth and sound liquidity, but thin operating margins and reliance on non-operating gains warrant monitoring. Given interim timing and undisclosed items (cash, capex, interest), conclusions should be viewed with moderate caution.

Profitability Analysis

ROE_decomposition: Net profit margin 0.77% × Asset turnover 0.943 × Financial leverage 2.49 = ROE 1.81% (interim). The ROE is modest and largely constrained by structurally low margins typical of distribution businesses; leverage is moderate and asset turnover is healthy for the sector. margin_quality: Gross margin is 7.0% (¥10.328bn/¥148.462bn). Operating margin is approximately 0.61% (¥0.91bn/¥148.462bn), down YoY in spite of revenue growth, implying SG&A/logistics pressure and limited operating leverage. Ordinary margin improves to ~0.88% (¥1.304bn/¥148.462bn), suggesting reliance on non-operating income. Net margin at 0.77% rises YoY due to below-the-line support. operating_leverage: Negative operating leverage in the period: +5.1% revenue vs. -15.6% operating income implies higher fixed/semifixed costs or expense inflation outpacing gross profit. EBITDA of ¥1.436bn (1.0% margin) underscores the thin cash earnings buffer; any cost uptick can materially impact operating income.

Growth Assessment

revenue_sustainability: Revenue growth of 5.1% YoY aligns with steady demand trends; in distribution, growth is typically driven by volume/mix and pricing pass-through rather than outsized market share shifts. Sustainability appears reasonable absent regulatory price pressures or contract losses. profit_quality: Operating income contracted despite higher sales, suggesting weaker underlying profitability. The divergence between operating income (down) and net income (up) indicates non-operating gains/support; quality of earnings is acceptable at the cash level (strong OCF/NI) but mixed on a P&L basis. outlook: Assuming stable demand and cost normalization, profitability could stabilize in the second half; however, continued logistics and personnel cost inflation or drug price revisions could keep operating margin subdued. Interim nature and seasonality caution against straight-line extrapolation of EPS.

Financial Health

liquidity: Current ratio 126.1% and quick ratio 102.9% indicate adequate near-term coverage. Working capital stands at ¥21.473bn. Inventories are ¥19.114bn, manageable relative to current assets but important to monitor for obsolescence in a healthcare supply context. solvency: Total liabilities of ¥85.59bn vs. equity of ¥63.346bn implies liabilities/equity of 1.35x. Implied equity ratio is ~40.2% (vs. undisclosed reported figure), suggesting a solid solvency position for a wholesaler. capital_structure: Financial leverage (assets/equity) at 2.49x is moderate. Interest expense is undisclosed (shown as zero), so interest coverage cannot be assessed from provided data; however, ordinary income comfortably exceeds operating income, implying no immediate strain from financing costs.

Cash Flow Quality

earnings_quality: OCF of ¥2.298bn vs. net income of ¥1.144bn yields OCF/NI of 2.01x, indicating strong cash conversion, likely supported by working capital inflows (details not disclosed). This supports the quality of reported earnings for the period. FCF_analysis: Investing cash flow is not disclosed (shown as zero), and capex details are unavailable; therefore true free cash flow cannot be determined despite a tabular FCF of zero. Without capex, maintenance vs. growth investment split cannot be assessed. working_capital: Current assets of ¥103.819bn and current liabilities of ¥82.346bn produce ¥21.473bn of working capital. Inventory at ¥19.114bn appears proportionate for scale; monitoring inventory days and receivables collections is key given margin thinness and cash flow reliance.

Dividend Sustainability

payout_ratio_assessment: Dividend per share and payout ratio are not disclosed in this dataset (zeros are placeholders). As such, a payout ratio cannot be credibly assessed for the interim period. FCF_coverage: Free cash flow is not derivable due to undisclosed investing cash flows/capex; therefore, dividend coverage by FCF cannot be evaluated. policy_outlook: No dividend policy details are provided in this release. Any view on distribution policy would require historical DPS/payout guidance and capex plans, which are not available here.

Risk Assessment

Business Risks:

• Structural margin pressure inherent in pharmaceutical/medical distribution
• Regulatory pricing changes (e.g., drug price revisions) affecting revenue and gross margin
• Cost inflation in logistics, labor, and utilities compressing operating margins
• Inventory obsolescence/expiry risk in healthcare products
• Customer concentration and credit risk with hospitals, clinics, and pharmacies
• Competitive pricing pressure from larger national distributors
• Supply chain disruptions impacting product availability and expedited freight costs

Financial Risks:

• Working-capital-intensive model leading to cash flow volatility
• Dependence on short-term liabilities for funding operations (implied by large current liabilities)
• Potential interest rate risk if borrowings are floating-rate (interest expense not disclosed)
• Thin EBITDA margin leaves limited buffer for shocks
• Reliance on non-operating income to support ordinary/net income in this period

Key Concerns:

• Negative operating leverage despite revenue growth
• Limited visibility on capex and cash balances due to undisclosed investing CF and cash
• Interim ROE constrained by very low net margin
• Sustainability of non-operating gains that lifted ordinary and net income

Investment Implications

Key Takeaways:

• Top-line growth of 5.1% YoY but operating income down 15.6% indicates cost pressure and margin compression
• Ordinary and net income resilience driven by non-operating support; sustainability uncertain
• Liquidity and solvency are sound with an implied equity ratio near 40% and current ratio at 126%
• Cash conversion is strong this half (OCF/NI ~2.0x), offset by lack of visibility on capex/FCF
• ROE of 1.81% reflects low net margins; improving operating efficiency is key to enhancing returns

Metrics to Watch:

• Gross and operating margin trends (bps change QoQ/YoY)
• SG&A-to-sales ratio and logistics cost per unit
• OCF/Net income, inventory days, and receivables days
• Ordinary income composition (recurring vs. one-off non-operating items)
• Debt/EBITDA and interest coverage once interest expense is disclosed
• Capex and investing cash flows to determine true FCF
• Equity ratio (implied) and liabilities mix (short vs. long term)

Relative Positioning: Within Japan’s healthcare distribution landscape, the company exhibits typical low gross and operating margins, moderate leverage, and adequate liquidity. Its asset turnover is healthy, supporting ROE despite thin margins. However, peers that better control SG&A/logistics or leverage scale may post higher operating margins; closing this gap is likely the key lever for improved returns.

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