OHKI HEALTHCARE HOLDINGS CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥182.75B
• Operating Income: ¥1.20B
• Net Income: ¥1.16B
• EPS: ¥86.57

Income Statement

Balance Sheet

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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

Verdict: Solid profit recovery on modest top-line growth, with margin expansion and strong ordinary income leverage, but thin structural margins and elevated leverage temper the quality of the beat. Revenue rose 4.4% YoY to 1,827.5, while operating income increased 45.8% YoY to 11.97, signaling improved cost discipline and better spread management. Ordinary income climbed 28.1% YoY to 18.62, aided by 7.80 in non-operating income, highlighting the importance of financial income in this period. Net income advanced 19.5% YoY to 11.80, with EPS at 86.57 yen. Gross profit reached 95.48, implying a gross margin of 5.2% this half, consistent with the company’s low-margin wholesale model. Operating margin improved to 0.655% from roughly 0.469% a year ago, a +18.6 bps expansion. Net margin rose to about 0.646% from ~0.564%, an +8.2 bps expansion. Ordinary income margin expanded to 1.02% from ~0.83%, a +18.8 bps gain, reflecting sizable non-operating contributions (notably dividends of 1.27 and interest income of 0.09). Earnings quality is mixed: interest coverage is strong at 18.4x, but non-operating income equals about 65% of operating income, raising questions on the repeatability of the profit mix. Cash flow disclosure is unavailable, so we cannot corroborate earnings with operating cash flow or free cash flow. Leverage is high (D/E 3.48x) and liquidity buffers are modest (current ratio 113.9%, quick ratio 85.9%), indicating dependence on working capital financing and stable credit lines. Asset efficiency is reasonable for a wholesaler (asset turnover 1.261), but ROIC at 1.9% underscores capital efficiency challenges. The effective tax rate is 35.7%, slightly dampening net profit conversion. Equity increased to 323.6, and book value per share is estimated at 2,372 yen. Dividend affordability appears manageable with a 31% payout ratio, but FCF coverage is unknown due to absent cash flow data. Forward-looking, sustaining operating margin gains while reducing reliance on non-operating income and improving cash conversion will be key to lifting ROE above the current 3.6%.

Profitability Analysis

ROE decomposition (DuPont): ROE 3.6% = Net Profit Margin 0.7% × Asset Turnover 1.261 × Financial Leverage 4.48x. The component most improved appears to be margin, as operating income growth (+45.8%) far outpaced revenue growth (+4.4%), while leverage likely remained structurally high and asset turnover stable for a wholesaler. Business drivers include better SG&A/GP leverage (SG&A 83.51 vs GP 95.48) and higher non-operating income (7.80; dividends 1.27, interest 0.09), which lifted ordinary income. Sustainability is mixed: operating leverage benefits could persist if procurement/pricing discipline holds, but non-operating income (market/portfolio sensitive) is less predictable. Concerning trends: profitability remains razor thin (OPM 0.655%, NPM 0.646%), and SG&A still absorbs about 87% of gross profit, leaving little buffer for shocks.

Growth Assessment

Revenue growth of 4.4% suggests steady demand and/or successful price pass-through in healthcare distribution. Operating income +45.8% YoY indicates improved spread management and cost control; ordinary income +28.1% benefited from non-operating items. Margin expansion: OPM +18.6 bps (to 0.655%), NPM +8.2 bps (to 0.646%), and ordinary margin +18.8 bps (to 1.02%). Growth quality is acceptable at the operating level but partly reliant on non-operating income (non-op equals ~65% of OP). With gross margin at 5.2%, sustaining growth hinges on scale, mix, and procurement efficiency rather than pricing power. Outlook: incremental operating margin improvement is possible, but upside is capped by the wholesale model’s structural margins; external income and interest rates could swing ordinary income.

Financial Health

Liquidity: Current ratio 113.9% (>1.0 but <1.5 benchmark), quick ratio 85.9% (<1.0) signals tight near-term liquidity. Solvency: Debt-to-equity 3.48x is high (warning threshold >2.0), though interest coverage is strong at 18.42x. Maturity mismatch: Current liabilities 1,063.39 vs cash 31.85 and receivables 765.44 indicate reliance on inventory monetization and rolling short-term debt (ST loans 100.78) and payables (615.97); a slowdown could pressure liquidity. Off-balance sheet: Not disclosed; no data provided on guarantees/lease commitments. Working capital: Positive at 147.87, but composition is receivables/inventory heavy, typical for wholesalers, increasing sensitivity to collection cycles.

Cash Flow Quality

Operating, investing, and financing cash flows are unreported, so OCF/Net Income and FCF cannot be assessed. As such, we cannot validate earnings with cash conversion nor gauge dividend and capex coverage. Potential risk factors include high receivables (765.44) relative to half-year sales, which could elongate cash conversion if customer terms loosen, and modest cash (31.85) vs ST loans (100.78), implying dependence on facilities. No clear signs of working capital manipulation can be inferred from available data, but monitoring AR and inventory days is essential.

Dividend Sustainability

Payout ratio is reported at 31.0%, which is conservative and suggests coverage from earnings. However, FCF coverage is unknown due to missing cash flow data, and the company’s high leverage and modest liquidity reduce buffers in a downturn. Without DPS detail, we assume dividends align with a steady payout policy; sustainability appears reasonable if operating margins hold and credit access remains stable.

Risk Assessment

Business Risks:

• Structurally thin margins (gross 5.2%, operating 0.655%) leave little cushion for shocks
• Dependence on non-operating income (7.80; ~65% of OP), which is less predictable
• Potential pricing pressure and competitive intensity in healthcare/OTC distribution
• Supplier and customer concentration risks typical for wholesale models (not disclosed but industry-norm)
• Regulatory and reimbursement changes affecting healthcare product demand and pricing

Financial Risks:

• High leverage (D/E 3.48x) despite strong interest coverage
• Tight liquidity (quick ratio 85.9%); reliance on short-term funding and payables
• Refinancing and interest rate risk tied to short-term loans (100.78)
• Working capital sensitivity: elevated receivables and inventory vs cash

Key Concerns:

• ROIC at 1.9% indicates weak capital efficiency relative to typical 7–8% targets
• OCF and FCF unreported, preventing cash-backed validation of earnings
• Effective tax rate of 35.7% limits net profit conversion
• Earnings mix skewed to non-operating items, raising volatility risk

Investment Implications

Key Takeaways:

• Strong YoY profit growth with operating margin expansion despite modest sales growth
• Ordinary income uplift relies materially on non-operating income
• Liquidity adequate but not ample; quick ratio below 1.0 and high D/E warrant caution
• ROE of 3.6% constrained by thin margins and low ROIC
• Interest coverage robust, providing near-term debt service comfort

Metrics to Watch:

• Operating cash flow and free cash flow once disclosed
• AR and inventory days; receivables collection trends
• Operating margin and SG&A-to-gross-profit ratio
• Proportion of non-operating income to total profit
• Short-term debt levels and borrowing costs
• ROIC trajectory and asset turnover

Relative Positioning: Within low-margin healthcare distribution, the company demonstrates improving operating leverage but remains more leveraged than conservative peers and more reliant on non-operating income for ordinary profit, resulting in modest ROE/ROIC relative to best-in-class operators.

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