Quick View
| Metric | Current Period | Previous Year Same Period | YoY |
|---|---|---|---|
| Revenue | ¥522.41B | ¥492.27B | +6.1% |
| Operating Income | ¥14.45B | ¥15.12B | −4.4% |
| Equity-Method Investment Gain/Loss | - | - | - |
| Ordinary Income | ¥15.46B | ¥16.54B | −6.5% |
| Net Income | ¥9.35B | ¥10.64B | −12.1% |
| ROE | 6.3% | 7.1% | - |
Executive Summary
For the cumulative Q3 period of the fiscal year ending March 2026, revenue increased while earnings declined, as lower profitability in the core businesses weighed on profit. Revenue was ¥5224.1億 (+6.1% year on year), Operating Income was ¥144.5億 (-4.4%), Ordinary Income was ¥154.6億 (-6.5%), and Net Income was ¥93.5億 (-12.1%). Revenue growth was driven by the expansion of new SPD contracts in the Medical Supplies Business, while the primary factor behind the earnings decline was the absence of the large senior-oriented condominium completion recognized in the Total Pack Produce Business in the previous fiscal year.
Factors Affecting Performance
【Revenue】Revenue increased 6.1% year on year. The Medical Supplies Business, which accounts for 72.4% of the revenue mix, led overall growth with a 7.5% increase, supported by the commencement of operations at three newly contracted SPD facilities (approximately 950 beds) and efficiency gains from the integration of five companies. The Pharmacy Business (+2.8%), Total Pack Produce Business (+3.0%), and Life Care Business (+1.9%) also secured revenue growth, with all segments trending toward higher revenue.
【Profit and Loss】Operating Income declined 4.4% year on year, Ordinary Income declined 6.5%, and Net Income declined 12.1%. The Total Pack Produce Business, which makes a major contribution to Operating Income, posted a substantial 24.3% decline due to the reversal of the prior-year impact of a large project, making it the primary factor behind the decline in company-wide Operating Income. The decline in Net Income (-12.1%) exceeded the decline in Ordinary Income (-6.5%), potentially reflecting changes in income tax expense and profit or loss attributable to non-controlling interests. Extraordinary income and losses were small on a net basis at negative ¥0.13B, indicating that the impact of temporary factors was limited. In conclusion, the company experienced higher revenue but lower earnings.
Segment Analysis
The core business is the Medical Supplies Business, which accounts for 72.4% of the revenue mix but has a low Operating Profit margin of 1.3%. In terms of contribution to Operating Income, the Total Pack Produce Business (Operating Income of ¥4.98B, profit margin of 5.5%) accounts for 34.3% of total segment profit despite representing 17.2% of the revenue mix, making it the effective earnings driver. Operating Income in this business declined 24.3% year on year due to the reversal of the impact of large projects in the previous fiscal year, making it the primary factor behind the decline in company-wide Operating Income. The Pharmacy Business has the highest profit margin at 11.8%, improving from 10.1% in the previous year due to the benefits of integrating four companies. Operating Income in the Life Care Business declined 2.2% year on year due to higher utility and labor costs. There is a significant disparity in profit margins among the segments, and the expansion of the low-margin Medical Supplies Business in the revenue mix is a structural factor weighing on the company-wide profit margin.
Key Financial Indicators
Profitability: ROE was 6.3%, and the Operating Profit margin was 2.8% (down from 3.1% in the previous year).
Cash flow quality: Against Net Income of ¥93.5億, working capital has expanded alongside an increase in accounts receivable (¥1345.9億), and the OCF-to-Net Income multiple appears limited based on the available materials.
Financial soundness: Equity Ratio was 38.4% (39.1% in the previous year), and the Current Ratio was 134.8%.
Other: Basic EPS was ¥100.70 (¥111.48 in the previous year, -9.7%).
Cash Flow Analysis
Details of OCF and other cash flow items cannot be calculated from this material; however, cash and deposits were ¥784.6億, essentially flat at +1.2% year on year. Accounts receivable and notes receivable were ¥1345.9億, and the lengthening of DSO (approximately 71–94 days) may be putting pressure on working capital. Interest-bearing debt primarily consists of long-term borrowings of ¥268.3億, while short-term borrowings were small at ¥7.6億, indicating a financing structure centered on long-term funding. Cash generation assessment: Monitoring is required from the perspective of accounts receivable accumulation.
Earnings Quality
The gap between Ordinary Income of ¥154.6億 and Net Income attributable to owners of the parent of ¥93.8億 was primarily due to income taxes and other taxes (¥59.9億, representing an effective tax rate of approximately 39.0%). Non-operating income was ¥16.2億, equivalent to only 0.3% of revenue, indicating that the contribution of external factors at the Ordinary Income stage was limited. Extraordinary income and losses were small on a net basis at negative ¥1.3億, and temporary factors did not materially distort performance. Comprehensive Income of ¥97.0億 was close to Net Income of ¥93.5億, while changes in valuation differences on available-for-sale securities and other items were also minor; earnings quality is therefore based on recurring operating business results.
Earnings Forecast and Guidance
Progress against the full-year forecast was 74.6% for Revenue (close to the standard 75%), 55.6% for Operating Income (approximately 19pt below the standard), 58.3% for Ordinary Income, and 60.5% for Net Income. The lag in Operating Income progress is notable. To achieve the full-year plan of ¥260.0億, approximately ¥115.5億 in Operating Income must be recorded in Q4, representing approximately 80% of the cumulative Q3 result. The company expects a recovery to a full-year Operating Profit margin of 3.7%, supported by the recognition of large projects weighted toward the second half in the Total Pack Produce Business, the full-year contribution of new facilities in the Medical Supplies Business, and the full-scale commencement of operations at the new logistics hub, “SHIP Granbase Tokyo.”
Shareholder Returns
The full-year dividend forecast is ¥60.00 per share annually (assuming a Q2 dividend of ¥0 and a year-end dividend of ¥58). The Payout Ratio against the full-year forecast EPS of ¥166.85 is approximately 36.0%. There is no disclosure regarding share repurchases, and shareholder returns are evaluated solely based on the Payout Ratio. With earnings progress below plan, the realization of the concentrated year-end dividend depends on an earnings recovery in Q4.
Catalysts
【Short term】Progress in the recognition of large projects in the Total Pack Produce Business during Q4 and consistency with the full-year earnings forecast will be key areas of focus.
【Long term】Key points of interest include efficiency improvements in the Medical Supplies Business through the full-scale operation of the Tokyo metropolitan medical-materials logistics hub, “SHIP Granbase Tokyo” (operations commenced in February 2026), as well as the continued realization of synergies from the integration of four companies in the Pharmacy Business.
Industry Benchmark (For Reference; Compiled by the Company)
Industry Benchmark (trading)
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Profit Margin | 2.8% | 3.3% (1.8%–5.0%) | −0.6pt |
| Net Profit Margin | 1.8% | 3.1% (1.4%–6.3%) | −1.3pt |
The company’s profitability is below the industry median, with the divergence particularly large for the Net Profit margin.
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (Year on Year) | 6.1% | 5.2% (-4.1%–8.6%) | +0.9pt |
Revenue growth exceeds the industry median, but conversion into profitability lags the industry average.
※Source: Compiled by the Company
Risk Factors
-
Profitability volatility in the core business: Segment profit in the Total Pack Produce Business declined 24.3% year on year, and the project profitability and progress management of this business, which accounts for 34.3% of total segment profit, have a significant impact on company-wide earnings.
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Concentration in low-margin businesses: The Medical Supplies Business accounts for 72.4% of the revenue mix but has an Operating Profit margin of only 1.3%, creating a structure in which increases in procurement prices and personnel expenses can readily pressure its thin profit margin.
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Working capital accumulation: Accounts receivable and notes receivable reached ¥1345.9億, and the lengthening of collection periods associated with the expansion of operations at new SPD facilities is a point to monitor regarding funding efficiency during a period of revenue growth.
Key Points of Focus in the Results
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A substantial recovery in Operating Income in Q4 is required to achieve the full-year plan, and the gap between the Operating Income progress rate of 55.6% and the Revenue progress rate of 74.6% is a key point of focus in the results.
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The Pharmacy Business improved its Operating Profit margin from 10.1% to 11.8% through the integration of four companies, and the quantifiable benefits of group restructuring and integration can be observed as a structural change.
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The contrasting trends of higher revenue and earnings in the Medical Supplies Business and a substantial earnings decline in the core Total Pack Produce Business are driving fluctuations in company-wide performance, and the future progress of both businesses could become a turning point for the profit margin trend.
Theoretical Share Price (Reference Value)
| Scenario | Theoretical Share Price |
|---|---|
| bear (bearish) | ¥1,669 |
| base (base case) | ¥1,687 |
| bull (bullish) | ¥1,718 |
| Calculation Assumption | Value |
|---|---|
| Book Value per Share (BPS) | ¥1,622 |
| Adjusted Forecast EPS | ¥173.0 |
| Cost of Equity r | 9.27% (10-year government bond 2.77% + equity risk premium 6.00% + size premium 0.50%) |
| Residual Income Persistence Factor ω / Explicit Forecast Period | 0.62 / 5 years |
| Assumed Payout Ratio | 36.0% |
| Forecast EPS Confidence Adjustment | ×1.037 (based on the industry’s historical guidance achievement rate) |
| Implied PBR / PER | 1.04x / 9.8x |
Sensitivity: ¥1,640–¥1,736 at ±1% for the cost of equity, and ¥1,685–¥1,689 at ±0.1 for ω.
Notes:
- Net assets as of the quarter-end are used (there is a timing gap relative to the full-year forecast).
- As net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.
(Calculation model: Residual Income Model (Ohlson-type, explicit five-year fade) / Interest rate reference month: 2026-07 / This is a mechanically calculated value based solely on publicly disclosed data; it is not a forecast of the market share price or a recommendation of any specific investment action, and does not forecast or guarantee future share prices.)
This report is an earnings analysis document automatically generated by AI through an integrated analysis of XBRL earnings summary data and PDF earnings presentation materials. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly disclosed earnings data. Investment decisions should be made at your own responsibility, after consulting a professional where necessary.
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AI Financial Analysis
Executive Summary
FY2026 Q3 performance was mixed: revenue growth remained sound, but profitability weakened and full-year earnings delivery is back-end loaded. Nine-month revenue increased 6.1% year on year to ¥522.4bn. Operating income declined 4.4% to ¥14.45bn despite the higher sales base. Ordinary income fell 6.5% to ¥15.46bn. Profit attributable to owners declined 10.8% to ¥9.38bn, equivalent to EPS of ¥100.70. Gross profit was broadly flat at ¥46.10bn, indicating that the ¥30.23bn increase in cost of sales absorbed the revenue increase. The gross margin contracted by 58bp year on year to 8.8%. The operating margin contracted by 30bp to 2.8%. The net profit margin declined by 34bp to 1.8%. The largest profit contributor, the Total Pack Produce business, recorded a 24.3% decline in segment profit, more than offsetting improvements in Medical Supply and Pharmacy. Medical Supply remained the largest revenue business and expanded both revenue and profit, although its 1.3% segment margin remains structurally thin. The Pharmacy business delivered the strongest segment margin at 11.9% and a 20.9% increase in segment profit. Nine-month operating-income progress against the full-year forecast is 55.6%, materially below the standard 75% pace, whereas sales progress of 74.6% is broadly in line. Management's full-year operating-income target consequently requires a substantial fourth-quarter recovery in margin, with the forecast implying a 3.7% full-year operating margin versus 2.8% in the first nine months. The balance sheet retains ample near-term liquidity, with cash of ¥78.46bn exceeding interest-bearing debt of ¥27.60bn. Receivable days of 71 remain a working-capital monitoring point, though the absolute trade receivables balance fell slightly year on year despite revenue growth. The planned ¥60 annual dividend implies a forecast payout ratio of approximately 36%, which appears moderate relative to forecast earnings.
Profitability Analysis
Annualized ROE was 8.4%, comprising a 1.8% net profit margin, 1.791x annualized asset turnover and 2.61x financial leverage. The weak component is margin rather than asset utilization: the 1.8% net margin is below the 3% caution threshold, while turnover is robust for a healthcare distribution and services group. Financial leverage supports the reported ROE, meaning returns are less resilient if margins remain under pressure. Gross margin fell to 8.8% from 9.4% in the prior-year period, a 58bp contraction, and was the principal operational driver of the operating-income decline. SG&A rose 1.9% to ¥31.65bn, slower than revenue growth, so SG&A discipline partly cushioned the gross-profit pressure rather than causing it. Operating margin fell to 2.8% from 3.1%, a 30bp compression, triggering the low-operating-efficiency alert because the margin is below 5%. This margin profile is partly characteristic of Medical Supply's high-volume, low-margin distribution model: it generated ¥378.48bn of external revenue, or 72.4% of consolidated sales, but a 1.3% segment margin. The core business by operating-income contribution was Total Pack Produce, contributing ¥49.84bn of segment profit, but its segment margin declined sharply to 5.5% from 7.4% as profit dropped 24.3% despite 3.0% sales growth. Medical Supply improved segment profit 13.6% to ¥47.58bn on 7.5% revenue growth, lifting margin by 7bp to 1.3%. Life Care revenue grew 1.9% to ¥281.58bn while segment profit fell 2.2% to ¥17.07bn, reducing margin by 26bp to 6.1%. Pharmacy revenue rose 2.8% to ¥258.83bn and segment profit increased 20.9% to ¥30.78bn, expanding margin by 178bp to 11.9%. The sustainability of consolidated profit improvement therefore depends on a recovery in Total Pack Produce profitability and continued execution in Pharmacy, rather than solely on revenue growth. The 39.0% effective tax rate produced a 0.612 tax burden, which further constrained conversion of pre-tax profit into net income.
Growth Assessment
Revenue growth was broad based across all four reported segments. Medical Supply was the principal growth engine in absolute terms, adding ¥262.52bn of revenue year on year. Total Pack Produce added ¥26.53bn of revenue but experienced a disproportionate ¥15.96bn decline in segment profit. Pharmacy added ¥7.01bn of revenue and ¥5.33bn of segment profit, making it the strongest incremental earnings contributor. Full-year revenue guidance of ¥700.0bn implies 3.2% growth and is largely supported by the 74.6% nine-month progress rate. Full-year operating-income guidance of ¥26.0bn implies 4.9% growth, but only 55.6% has been achieved through Q3. Full-year ordinary-income guidance of ¥26.5bn has a 58.3% Q3 progress rate, also below the normal 75% run rate. Full-year profit attributable to owners guidance of ¥15.5bn has a 60.5% progress rate. The forecast requires approximately ¥11.55bn of Q4 operating income, compared with ¥14.45bn generated cumulatively in the first nine months. This implies that the investment case should focus on the timing and credibility of fourth-quarter margin normalization, particularly in Total Pack Produce. Equity-method earnings were ¥4.97bn, down 53.4% year on year, contributing to the sharper decline in ordinary income relative to operating income. Foreign-exchange gains rose to ¥3.58bn from ¥0.63bn, offering some offset but representing a less predictable earnings source than operating profit.
Financial Health
Liquidity is adequate, with a current ratio of 134.8% and a quick ratio of 120.4%. Current assets of ¥269.94bn exceeded current liabilities of ¥200.22bn by ¥69.71bn. Cash and deposits totaled ¥78.46bn, while short-term loans were only ¥0.76bn; cash covered short-term loans by 102.84x. The maturity profile is therefore favorable, as most borrowings are long term: long-term loans were ¥26.83bn versus total interest-bearing debt of ¥27.60bn. Interest coverage was a strong 43.66x, indicating modest servicing pressure under the current earnings base. Debt to capital was 15.6%, well within the 40% investment-grade benchmark. The reported D/E ratio of 1.61x is below the 2.0x aggressive-financing warning threshold, while interest-bearing debt is only approximately 0.19x total equity. Cash exceeds interest-bearing debt by approximately ¥50.87bn, supporting net-cash financial flexibility. Trade payables of ¥128.32bn and electronically recorded obligations of ¥43.52bn are significant components of the operating funding model and should be assessed alongside receivables and inventory. Treasury stock declined in absolute value by ¥104.78bn to negative ¥50.49bn, a 67.5% movement and a material change in equity composition. The reduction in treasury stock supports shareholders' equity presentation, but capital surplus also declined by ¥41.58bn and retained earnings by ¥76.62bn year on year; these movements make capital-allocation execution an important monitoring item. Goodwill of ¥7.02bn represents only 4.7% of equity and 1.8% of assets, limiting goodwill-related balance-sheet and impairment sensitivity. Intangible assets were 3.1% of assets, also low relative to the 20% benchmark. No material goodwill movement or fixed-asset impairment was recognized during the nine-month period.
Notable B/S Changes
Treasury stock: improved by ¥104.78bn (67.5%) to negative ¥50.49bn - a material equity-composition change; capital-allocation actions and their interaction with capital surplus and retained earnings should be monitored. Work in process: increased by ¥28.28bn (84.1%) to ¥61.91bn - indicates greater project inventory exposure and raises the importance of delivery timing and inventory conversion. Finished goods: increased by ¥52.90bn (22.4%) to ¥288.65bn - a large absolute increase relative to the thin-margin business model, requiring monitoring of turnover and potential inventory carrying risk. Electronically recorded obligations: increased by ¥80.50bn (22.7%) to ¥435.20bn - reflects greater use of supplier-related operating liabilities and reinforces the importance of working-capital discipline. Long-term loans: decreased by ¥37.86bn (12.4%) to ¥268.34bn - supports the favorable funding profile and contributes to cash exceeding total interest-bearing debt.
Cash Flow Quality
Dividend Sustainability
The full-year dividend forecast is ¥60 per share. Against forecast EPS of ¥166.85, the implied dividend payout ratio is approximately 36.0%. This is below the 60% sustainability benchmark and leaves a meaningful earnings retention buffer. The Q2 dividend per share was ¥0, consistent with an end-of-year-focused distribution profile. The moderate payout ratio, net-cash position and strong interest coverage support financial capacity for the stated dividend. The principal determinant of dividend resilience is achievement of the ¥15.5bn full-year profit forecast, given that nine-month attributable profit progress is 60.5% versus the standard 75% pace.
Risk Assessment
Business risks include Margin recovery risk: consolidated operating margin fell 30bp year on year to 2.8%, and the low-margin Medical Supply business represents 72.4% of revenue. Small changes in procurement terms, reimbursement conditions, product mix or pricing can have an outsized effect on profit., Total Pack Produce execution risk: segment profit fell 24.3% to ¥49.84bn while revenue grew 3.0%, indicating substantial margin pressure in the largest segment by profit contribution., Healthcare-sector reimbursement and cost inflation risk: healthcare providers and pharmacy-related customers operate under reimbursement and budget constraints, which can restrict pass-through of labor, logistics and procurement cost inflation., Equity-method income volatility: equity-method earnings fell 53.4% year on year to ¥4.97bn, reducing ordinary-income resilience outside the consolidated operating businesses., Foreign-exchange sensitivity: foreign-exchange gains of ¥3.58bn supported non-operating income, but these gains are inherently less recurring than operating earnings..
Financial risks include Receivable collection risk: DSO of 71 days exceeds the 60-day alert threshold. This is a concern because receivables are the largest asset category at 34.6% of total assets and can absorb liquidity if collection periods lengthen. The absolute trade receivables balance was slightly lower year on year despite higher sales, which is a mitigating indicator, but the duration of the collection cycle remains material., Working-capital funding dependence: trade payables and electronically recorded obligations total ¥171.84bn, making supplier-credit management important to operating liquidity., Profit-conversion risk: the 39.0% effective tax rate and 0.612 tax burden materially reduce conversion of pre-tax income to attributable profit., Capital-structure monitoring: the reported D/E ratio is 1.61x, below the aggressive threshold, and cash exceeds interest-bearing debt; nevertheless, liabilities account for 61.6% of total assets, requiring continued discipline in working-capital management..
Key concerns include The full-year operating-income forecast requires a pronounced Q4 acceleration: 55.6% of the target was achieved through Q3, 19.4 percentage points below the standard 75% progress rate., Low operating efficiency is the central earnings issue: EBIT margin of 2.8% is below the 5% caution threshold and leaves limited buffer against cost or pricing pressure., Low gross margin of 8.8% is structurally associated with the distribution-heavy sales mix, but the 58bp year-on-year decline demonstrates that scale growth did not translate into gross-profit growth., The increase in finished goods to ¥288.65bn from ¥235.75bn, together with work in process rising to ¥61.91bn from ¥33.63bn, warrants monitoring for inventory turnover and project execution..
Investment Implications
Key takeaways include Revenue momentum is intact, with 6.1% consolidated growth and positive growth in every reported segment., Profitability, not demand, is the near-term issue: operating income declined 4.4% as gross margin contracted 58bp., Medical Supply provides scale and improved profit, while Pharmacy provides the highest segment margin and strongest profit growth., A Total Pack Produce margin recovery is necessary for the company to deliver its full-year operating-income target., Liquidity and debt-servicing capacity are solid, supported by net cash, a 134.8% current ratio and 43.66x interest coverage., The ¥60 forecast dividend implies a moderate 36.0% payout ratio based on forecast EPS..
Metrics to watch include Total Pack Produce segment margin and segment profit, Consolidated gross margin and operating margin, Q4 operating income required to close the gap to the ¥26.0bn full-year target, Medical Supply margin progression, Pharmacy segment margin sustainability, DSO and trade receivables relative to sales, Finished goods and work-in-process balances, Equity-method earnings and foreign-exchange gains, Treasury-stock and retained-earnings movements.
Regarding relative positioning, The company combines a high-volume, low-margin healthcare distribution base with higher-margin Total Pack Produce, Life Care and Pharmacy operations. Its annualized ROE of 8.4% is supported by strong asset turnover and financial leverage rather than a high profit margin. Balance-sheet risk is comparatively contained by net cash and strong interest coverage, while relative earnings quality depends on restoring core segment margins and reducing reliance on volatile non-operating contributions.