| Indicator | This Period | Prior Year Same Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥7181.6B | ¥6782.3B | +5.9% |
| Operating Income / Operating Profit | ¥244.8B | ¥247.8B | -1.2% |
| Share of Profit (Loss) of Associates | ¥6.1B | ¥10.9B | -43.8% |
| Ordinary Income | ¥263.3B | ¥260.2B | +1.2% |
| Net Income / Net Profit | ¥54.4B | ¥57.3B | -5.0% |
| ROE | 3.6% | 3.8% | - |
For the fiscal year ended March 2026, revenue was ¥7,181.6B (YoY +¥399.3B, +5.9%), Operating Income was ¥244.8B (YoY -¥3.0B, -1.2%), Ordinary Income was ¥263.3B (YoY +¥3.1B, +1.2%), and Net Income attributable to owners of the parent was ¥133.9B (YoY -¥17.3B, -11.5%). The company reported higher revenue but lower profit. The Medical Supply Business led revenue growth, but deterioration in gross margin to 9.3% (down -0.5pt from 9.8% a year earlier), recognition of special losses of ¥33.3B, and a high effective tax rate of 41.5% were the main factors behind the decline in net profit.
[Revenue] Revenue of ¥7,181.6B (+5.9%) was led by the Medical Supply Business at ¥5,117.2B (+7.1%), accounting for 71.2% of consolidated sales. This segment performed steadily due to expanded sales of medical consumables and specific insured medical materials. The Pharmacy Business also grew to ¥348.1B (+3.6%), Total Pack Produce Business rose slightly to ¥1,386.2B (+0.9%), and the Life Care Business was stable at ¥374.1B (+1.8%). Over 90% of external customer sales were domestic, indicating limited regional diversification.
[Profitability] Operating Income declined to ¥244.8B (-1.2%). Gross margin fell to 9.3% (down -0.5pt YoY), with gross profit amounting to ¥667.0B (+0.0%, almost flat). SG&A was controlled at ¥422.2B (+0.6%), but could not offset the gross margin deterioration, resulting in an operating profit margin of 3.4% (down -0.3pt from 3.7% the prior year). Non-operating income of ¥26.3B included foreign exchange gains of ¥5.1B and share of profit of associates of ¥6.1B; after subtracting non-operating expenses of ¥7.8B, Ordinary Income was ¥263.3B (+1.2%). However, recognition of special losses of ¥33.3B (including valuation losses on investment securities of ¥7.4B and impairment losses of ¥4.1B) and corporate taxes of ¥96.0B (effective tax rate 41.5%) led to Net Income attributable to owners of the parent of ¥133.9B (-11.5%). In conclusion, the company reported higher revenue but lower profit.
Total Pack Produce Business: Revenue ¥1,386.2B (+0.9%), Operating Income ¥108.1B (-10.0%), Margin 7.8% (down -0.9pt from 8.7%). The segment conducts bundled sales and maintenance of medical devices/equipment and real estate leasing; profitability deteriorated due to weaker project margins. Medical Supply Business: Revenue ¥5,117.2B (+7.1%), Operating Income ¥74.8B (+7.4%), Margin 1.5% (flat YoY). Increased sales of medical consumables drove revenue and profit growth, but the low-margin structure persists. Life Care Business: Revenue ¥374.1B (+1.8%), Operating Income ¥22.2B (+1.2%), Margin 5.9% (down -0.1pt from 6.0%). Operations of nursing homes, group homes, and meal services were stable. Pharmacy Business: Revenue ¥348.1B (+3.6%), Operating Income ¥40.0B (+16.9%), Margin 11.5% (up +0.7pt from 10.8%). Efficiency improvements and margin recovery in pharmacy operations led to double-digit profit growth, maintaining the highest margin among segments.
[Profitability] Operating profit margin was 3.4% (down -0.3pt from 3.7%), and net margin was 1.9% (down -0.3pt from 2.2%), remaining at low levels. ROE was 8.8% (calculated from Equity ¥1,510.7B and Net Income ¥133.9B), decomposable as Net Margin 1.9% × Total Asset Turnover 1.86x × Financial Leverage 2.55x. Gross margin of 9.3% reflects characteristics of distribution business; the -0.5pt YoY decline suggests pressure from price competition and higher procurement costs. [Cash Quality] Operating Cash Flow (OCF) was ¥220.8B, 1.65x Net Income ¥133.9B, indicating solid cash conversion; accrual ratio was -2.2%, reflecting high cash realization of earnings. OCF/EBITDA (OCF ¥220.8B / EBITDA (Operating Income ¥244.8B + Depreciation ¥54.8B = ¥299.6B)) was 0.74x, with increases in receivables and inventory absorbing working capital. DSO (Accounts receivable ¥1,373.6B ÷ Revenue ¥7,181.6B × 365 days) was approximately 70 days, showing a somewhat extended trend versus industry norms. [Investment Efficiency] Capital expenditures were ¥42.8B, 0.78x depreciation ¥54.8B, indicating primarily maintenance investment. Goodwill balance ¥67.1B was 4.4% of Net Assets ¥1,510.7B and 0.22x of EBITDA ¥299.6B, thus minor. ROA was 3.6% (Ordinary Income ¥263.3B ÷ Total Assets ¥3,851.1B), indicating moderate asset efficiency. [Financial Soundness] Equity Ratio was 39.6% (up +0.5pt from 39.1%), Current Ratio 138.1% (Current Assets ¥2,706.0B ÷ Current Liabilities ¥1,959.1B), and Quick Ratio 125.6%, indicating good liquidity. Interest-bearing debt (short-term borrowings ¥13.3B + long-term borrowings ¥256.1B + current portion of long-term borrowings ¥34.3B) totaled ¥303.7B, significantly exceeded by cash ¥805.7B, effectively a net cash position. Debt/EBITDA ratio was 1.01x, and Interest Coverage was 57.5x ((OCF ¥220.8B + Interest Paid ¥4.6B) ÷ Interest Expense ¥4.3B), indicating very high financial safety.
OCF was ¥220.8B (+8.3% YoY). Starting from pre-tax profit ¥231.1B, non-cash charges such as depreciation ¥54.8B and goodwill amortization ¥17.6B were added. Working capital movements included increase in trade receivables -¥60.3B, increase in trade payables +¥71.3B, and decrease in inventories +¥3.4B; after corporate tax payments -¥94.7B, OCF was calculated. The OCF subtotal of ¥308.8B less working capital adjustments and tax payments indicates solid underlying cash generation. Investing CF was -¥20.8B, with capital expenditures -¥42.8B, additional acquisitions of subsidiary shares -¥2.5B, and intangible asset investments -¥4.3B; these were partly offset by long-term loan recoveries +¥11.3B and proceeds from subsidiary sales +¥9.8B, limiting net outflow. Free Cash Flow was ¥200.0B, and Financing CF was -¥163.3B (dividend payments -¥54.7B, share buybacks -¥50.0B, long-term borrowings repayment -¥61.4B, short-term borrowings increase +¥1.1B) funded by FCF, resulting in cash increasing from ¥745.7B at the beginning of the period to ¥780.6B at the end (+¥37.4B). Capex/Depreciation 0.78x indicates conservative capital policy. FCF ¥200.0B sufficiently covers total shareholder returns of ¥104.7B (dividends ¥54.7B + share buybacks ¥50.0B) with FCF/Total Return 1.91x. Increase in receivables -¥60.3B absorbed cash in working capital, and the DSO ~70 days suggests room to improve collection terms.
Earnings quality was operating-driven, with Operating Income ¥244.8B accounting for 93% of Ordinary Income ¥263.3B. Non-operating income ¥26.3B (0.4% of revenue) included dividend income ¥2.9B, foreign exchange gains ¥5.1B, and share of profit of associates ¥6.1B—each relatively recurring or sustainable. Special gains ¥1.1B (including gains on sale of investment securities ¥0.5B) were one-off and small in scale, while special losses ¥33.3B (valuation losses on investment securities ¥7.4B, impairment losses ¥4.1B, loss on disposal of fixed assets ¥1.6B, etc.) pressured net income. Comparing Ordinary Income ¥263.3B to Net Income ¥133.9B shows a 49% gap, primarily due to special losses ¥33.3B and a high effective tax rate of 41.5% (Corporate taxes ¥96.0B ÷ Pre-tax profit ¥231.1B). The accrual ratio ((Net Income ¥133.9B - OCF ¥220.8B) ÷ Total Assets ¥3,851.1B) = -2.2% is negative, meaning OCF substantially exceeded Net Income and indicating high cash conversion quality. The difference between comprehensive income ¥128.6B and Net Income ¥133.9B was due to other comprehensive income such as valuation differences on available-for-sale securities -¥7.5B, indicating market value fluctuations of held financial assets affecting equity.
Guidance for FY2027 ending March 2027 forecasts Revenue ¥7,400.0B (YoY +3.0%), Operating Income ¥260.0B (YoY +6.2%), Ordinary Income ¥265.0B (YoY +0.6%), Net Income attributable to owners of the parent ¥160.0B (YoY +19.5%), and EPS ¥173.88. The plan assumes a modest margin improvement to an operating margin of 3.5% (from 3.4%, +0.1pt), with Operating Income growth (+6.2%) outpacing Revenue growth (+3.0%). Progress versus current results: Revenue progress rate 97.0% (¥7,181.6B ÷ ¥7,400.0B), Operating Income progress rate 94.2% (¥244.8B ÷ ¥260.0B), Ordinary Income progress rate 99.4% (¥263.3B ÷ ¥265.0B), and Net Income progress rate 83.7% (¥133.9B ÷ ¥160.0B), indicating acceleration in Net Income buildup is required in H2. Assumptions for achieving guidance include restoration of gross margin in the Medical Supply Business, maintenance of high profitability in the Pharmacy Business, improvement in project profitability in the Total Pack Produce Business, suppression of special losses, and normalization of effective tax rate. Dividend guidance has not been disclosed, suggesting a priority on internal investment and maintaining financial flexibility.
The year-end dividend was ¥60 per share. Based on the weighted average number of shares outstanding of 92,896 thousand, the annual dividend payment amount was approximately ¥5,570M, and the actual dividend paid was ¥5,470M. Payout ratio was 36.2% (Dividend ¥60 ÷ EPS ¥160.34 on a prior-year basis) or 41.6% (Dividend ¥60 ÷ EPS ¥144.19 on this-period basis), within a sustainable range (≤60%). Share buybacks totaled ¥5,000M, making total shareholder return ¥54.7B (dividends) + ¥50.0B (buybacks) = ¥104.7B, implying a Total Return Ratio of 78.2% relative to Net Income ¥133.9B. FCF ¥200.0B covers total returns with a coverage ratio of 1.91x, indicating returns are well funded by cash flow. Given cash and deposits ¥805.7B and interest-bearing debt ¥303.7B resulting in an effective net cash position, continuation of dividends and buybacks is financially sustainable. However, dividend forecasts for FY2027 are undisclosed, suggesting a cautious stance to decide shareholder return policy after confirming performance recovery.
Risk from low gross margin / low-margin structure: Gross margin 9.3% and operating margin 3.4% are low, implying limited resilience to intensified price competition or higher procurement costs. The -0.5pt decline in gross margin this period was the main cause of lower operating profit, and concentration of 71.2% of sales in the Medical Supply Business (margin 1.5%) weakens earnings stability.
Receivables collection lengthening and working capital pressure: DSO of approximately 70 days is trending longer, and trade receivables ¥1,373.6B (YoY +¥46.1B) are absorbing working capital. The increase in receivables of -¥60.3B offset about 27% of OCF ¥220.8B; if collection terms are not corrected, there is potential for bad debt risk or additional working capital needs.
Risk of recurring high tax burden and special losses: Effective tax rate 41.5% significantly exceeds the standard tax rate (around 30%) and depressed Net Income this period. Special losses of ¥33.3B (valuation loss on investment securities ¥7.4B, impairment losses ¥4.1B, etc.) are temporary, but recurring valuation changes of held assets or deterioration in business conditions could impair earnings stability and predictability.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 3.4% | 3.4% (1.4%–5.0%) | +0.1pt |
| Net Margin | 0.8% | 2.3% (1.0%–4.6%) | -1.5pt |
Operating margin is in line with the industry median, but net margin lags by -1.5pt due to high tax burden and special losses.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 5.9% | 5.9% (0.4%–10.7%) | +0.1pt |
Revenue growth rate is in line with the industry median, maintaining a standard growth pace within distribution.
※ Source: Company compilation
The higher revenue but lower profit result was driven by a -0.5pt decline in gross margin and a high tax burden. FY2027 guidance assumes a slight improvement to an operating margin of 3.5%. Restoration of gross margin in the Medical Supply Business and maintenance of high profitability in the Pharmacy Business are key to meeting guidance.
Cash flow and financial position are very healthy: FCF ¥200.0B, effectively net cash, and Debt/EBITDA 1.01x indicate high safety. Payout ratio 41.6% and Total Return Ratio 78.2% are within sustainable ranges, supporting continued shareholder returns.
Increasing receivables and DSO ≈70 days indicate scope for improving working capital efficiency and warrant monitoring of collection risk. OCF/EBITDA 0.74x could improve to >0.9x with better receivables management.
This report was auto-generated by AI analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the firm from public financial statements. Investment decisions are the sole responsibility of the investor; please consult professional advisors as appropriate.