WAKAMOTO PHARMACEUTICAL CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥4.38B
• Operating Income: ¥-195M
• Net Income: ¥-134M
• EPS: ¥-3.86

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

Wakamoto Pharmaceutical (4512) posted FY2026 Q2 (non-consolidated, JGAAP) revenue of ¥4,382m, up a solid 14.9% YoY, indicating successful top-line traction likely driven by OTC demand recovery and/or pricing. Despite higher sales, profitability remained weak: operating income was a loss of ¥195m (flat YoY), ordinary loss ¥175m, and net loss ¥134m, though the bottom line narrowed significantly YoY (+210.4%), helped by non-operating/tax effects. Gross profit was ¥1,768m, yielding a healthy 40.3% gross margin, but SG&A intensity kept operating results negative. Implied operating expenses were about ¥1,963m, roughly 44.8% of sales, which nearly consumed the gross profit, signaling an elevated fixed-cost base. EBITDA turned slightly positive at ¥11m (0.3% margin), reflecting meaningful non-cash depreciation and amortization of ¥206m. DuPont analysis shows net margin of -3.06%, asset turnover of 0.295x, and financial leverage of 1.28x, producing a calculated ROE of -1.16%—modestly negative and consistent with reported figures. Liquidity is very strong, with a current ratio of 437.8% and quick ratio of 341.3%, underpinned by ¥8,908m in current assets and ¥2,035m in current liabilities. The balance sheet is conservative: total liabilities are ¥3,392m versus total equity of ¥11,588m; while the reported equity ratio is 0.0% (unreported), the implied equity ratio is approximately 77.9% (equity/total assets), pointing to low leverage. Operating cash flow was positive at ¥283m, more than covering the net loss, suggesting favorable working capital dynamics and solid cash earnings quality. Interest expense remains negligible at ¥0.4m, and financial risk from debt service appears low. Dividends were not paid (DPS ¥0), which is prudent given continuing operating losses and the need to prioritize reinvestment and cost normalization. Inventory of ¥1,964m appears manageable relative to half-year sales; however, monitoring inventory turns is important amid demand normalization. Overall, the company demonstrates improving revenue momentum and cash generation despite negative earnings, but must execute on cost discipline to translate gross margin strength into sustainable operating profit. Data limitations exist for certain disclosures (e.g., cash and equivalents, investing cash flow, equity ratio, share data), so conclusions draw on available non-zero items and implied computations.

Profitability Analysis

ROE_decomposition:

• net_profit_margin: -0.0306
• asset_turnover: 0.295
• financial_leverage: 1.28
• calculated_ROE: -0.0116
• interpretation: Negative ROE is primarily driven by a modest net loss (-3.06% margin); low leverage (1.28x) neither amplifies losses nor aids returns. Asset turnover at 0.295x is subdued for a half-year snapshot, consistent with a balance sheet-heavy OTC pharma business. margin_quality: Gross margin is solid at 40.3%, indicating pricing power and/or product mix resilience. However, SG&A intensity (implied ¥1,963m, ~44.8% of sales) offsets gross profit, resulting in an operating margin of -4.5%. EBITDA margin is 0.3%, implying that non-cash D&A is a major driver of the gap between EBITDA and EBIT. operating_leverage: Revenue grew 14.9% YoY but failed to lift the company into operating profitability, indicating a high fixed-cost base and limited operating leverage realization in the period. As sales scale further or SG&A is rationalized, incremental margins could improve meaningfully given the existing gross margin profile.

Growth Assessment

revenue_sustainability: Top-line growth of +14.9% YoY is robust for a mature OTC/pharma brand and suggests stable demand recovery or effective pricing/promotion. Sustainability will hinge on channel execution in drugstores, product renewal cycles, and competitive intensity. profit_quality: Despite revenue growth, profitability remains negative at the operating and net levels. The improvement in net loss (+210.4% YoY) appears driven partly by non-cash/tax effects (D&A ¥206m; income tax benefit of ~¥118m), not purely by core operating gains. outlook: If the company maintains high-30s to low-40s gross margins and achieves SG&A efficiency, a path to breakeven is plausible. Near-term catalysts include continued volume recovery, pricing carryover, and cost discipline. Risks include input cost inflation and marketing spend required to sustain growth.

Financial Health

liquidity: Current assets ¥8,908m vs current liabilities ¥2,035m yield a current ratio of 437.8% and quick ratio of 341.3%, indicating ample short-term liquidity. Working capital stands at ¥6,873m. solvency: Total liabilities are ¥3,392m against total equity of ¥11,588m (debt-to-equity 0.29x). Reported equity ratio is 0.0% (unreported), but implied equity ratio is ~77.9%, signaling a strong capital base and low structural leverage. capital_structure: Minimal interest expense (¥0.4m) and a very high interest coverage ratio in absolute terms (negative due to EBIT loss) indicate low financial risk from debt but underscore the need to restore operating profitability.

Cash Flow Quality

earnings_quality: Operating cash flow of ¥283m exceeds the net loss of ¥134m (OCF/NI = -2.11 due to negative NI), supported by non-cash D&A (¥206m) and likely favorable working capital movements. This suggests cash earnings quality is better than accrual earnings imply. FCF_analysis: Investing cash flow is reported as 0 (unreported), so capex is not disclosed; therefore, true free cash flow cannot be determined from available data. EBITDA is marginally positive, which is a necessary but not sufficient condition for sustainable FCF. working_capital: Inventories at ¥1,964m appear reasonable relative to semiannual sales (≈45% of H1 sales), but monitoring turnover is key to prevent cash tie-up. Receivables and payables details are not disclosed; nonetheless, positive OCF suggests net working capital did not deteriorate materially.

Dividend Sustainability

payout_ratio_assessment: With a net loss (EPS -¥3.86) and DPS of ¥0.00, the payout ratio is 0%. Given negative earnings, distributions would not be supported by profits. FCF_coverage: True FCF coverage cannot be assessed as capex is undisclosed (investing CF reported as 0 indicates unreported, not zero). On available data, paying dividends would rely on the balance sheet rather than recurring free cash flow. policy_outlook: A conservative stance (no dividend) appears prudent until operating profitability is restored and FCF visibility improves. Management focus likely remains on cost optimization and brand investment.

Risk Assessment

Business Risks:

• Product concentration in OTC digestive/probiotic categories exposes earnings to brand-specific demand swings.
• Intense competition in domestic OTC channels (drugstores, e-commerce) may pressure pricing and promotional spend.
• Input cost inflation (raw materials, packaging) could compress gross margins if not offset by pricing.
• Regulatory and quality compliance requirements inherent to pharmaceuticals/OTC products.
• Marketing effectiveness risk: higher SG&A may be required to sustain growth, delaying profit inflection.

Financial Risks:

• Continued operating losses could erode equity if not reversed over time.
• Potential working capital build (e.g., inventories) could consume cash if demand underperforms.
• Limited disclosed capex data creates uncertainty around future cash needs.
• Negative interest coverage (on EBIT basis) reflects ongoing earnings pressure, albeit with low absolute interest burden.

Key Concerns:

• Operating expense base (~¥1,963m) nearly offsetting gross profit, keeping EBIT negative.
• Dependence on non-operating/tax effects to narrow net losses rather than core margin expansion.
• Visibility on investment needs (capex, R&D, marketing) is limited due to incomplete CF disclosure.

Investment Implications

Key Takeaways:

• Top-line momentum is strong (+14.9% YoY), but operating losses persist.
• Gross margin at 40.3% is solid; the bottleneck is SG&A efficiency and scale.
• Cash generation outperformed accounting earnings (OCF ¥283m vs net loss ¥134m).
• Balance sheet strength is a key support (implied equity ratio ~77.9%, D/E 0.29x).
• Path to profitability likely hinges on operating leverage from cost control and sustained sales growth.

Metrics to Watch:

• SG&A-to-sales ratio and operating margin trajectory.
• Gross margin stability amid input cost dynamics.
• OCF consistency and inventory turnover.
• Capex and investing cash flows (once disclosed) to assess true FCF.
• Revenue growth by channel/product (where disclosed) and pricing elasticity.

Relative Positioning: Compared with small-cap Japanese OTC/pharma peers, Wakamoto exhibits a stronger balance sheet and liquidity but lags on profitability, with improving top-line trends that, if maintained alongside cost discipline, could narrow the gap.

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