| Metric | This Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥1707.7B | ¥1602.3B | +6.6% |
| Operating Income / Operating Profit | ¥355.0B | ¥354.5B | +0.1% |
| Profit Before Tax (Taxable Income) | ¥364.6B | ¥361.4B | +0.9% |
| Net Income / Net Profit | ¥297.3B | ¥325.6B | -8.7% |
| ROE | 10.2% | 13.2% | - |
For the fiscal year ended March 2026, Nihon Shinyaku reported Revenue of ¥1707.7B (YoY +¥105.4B +6.6%), Operating Income of ¥355.0B (YoY +¥0.5B +0.1%), Ordinary Income of ¥380.7B (YoY +¥212.9B +126.8%), and Net Income attributable to owners of the parent of ¥297.2B (YoY -¥28.4B -8.7%). Revenue achieved a third consecutive year of growth driven by the Pharmaceutical Business, but Operating Income was essentially flat as increased R&D expenditure (¥367.1B, as % of Revenue 21.5%) and expanded SG&A (¥435.7B, YoY +14.6%) constrained profit growth. Ordinary Income rose substantially due to expanded financial income and foreign exchange gains, but Net Income declined owing to higher income tax expense (¥67.3B, YoY +¥31.6B).
[Revenue] Revenue was steady at ¥1707.7B (YoY +6.6%). The Pharmaceutical Business was the core at ¥1484.8B (YoY +7.1%), consisting of Finished Goods Sales ¥900.6B (YoY +7.3%), Intellectual Property Income ¥494.6B (YoY +8.5%), and Co-promotion Income ¥89.6B (YoY -2.2%). The Functional Foods Business was ¥222.9B (YoY +3.3%), a modest increase. By region, Japan grew double digits to ¥936.7B (YoY +10.9%), Europe ¥564.5B (YoY +5.8%), while the U.S. declined to ¥164.1B (YoY -4.1%). Gross margin remained high at 66.4% but declined 1.7pt from 68.1% a year earlier.
[Profitability] Operating Income was ¥355.0B (YoY +0.1%), a marginal increase. SG&A expanded to ¥435.7B (YoY +14.6%) and R&D to ¥367.1B (YoY +6.9%), with expense growth outpacing revenue growth and limiting Operating Income expansion. Operating margin fell 1.3pt to 20.8% from 22.1% a year earlier. Financial income rose to ¥11.3B (prior ¥8.3B) and other income to ¥30.3B (prior ¥8.7B), driving Ordinary Income to ¥380.7B (YoY +126.8%). Profit Before Tax was ¥364.6B (YoY +0.9%), but income taxes increased to ¥67.3B (effective tax rate 18.5%, up 8.6pt from 9.9%), resulting in Net Income attributable to owners of the parent of ¥297.2B (YoY -8.7%). By segment, Pharmaceuticals posted Operating Income of ¥333.4B (prior ¥335.4B, -0.6%), a slight decrease, while Functional Foods fell substantially to ¥8.6B (prior ¥12.7B, -32.3%), highlighting profitability challenges. Conclusion: revenue up but profit essentially flat.
The Pharmaceutical Business recorded Revenue of ¥1484.8B (YoY +7.1%) and Operating Income of ¥333.4B (YoY -0.6%). Revenue increased driven by Finished Goods Sales and Intellectual Property Income, but increased R&D spending produced a slight decline in profit. Segment profit margin remained high at 22.4%. The Functional Foods Business reported Revenue of ¥222.9B (YoY +3.3%) and Operating Income of ¥8.6B (YoY -32.3%), with profitability deteriorating. Segment profit margin fell to 3.8% from 5.9% a year earlier (-2.1pt), as cost increases squeezed profits. The Pharmaceutical Business accounted for 87.0% of Revenue and 97.5% of Operating Income, remaining the company’s earnings pillar.
[Profitability] Operating margin was 20.8%, down 1.3pt from 22.1% last year, yet remains very high within the industry. Net margin was 17.4%, down 2.9pt from 20.3% a year earlier. ROE was 11.0%, down 2.9pt from 13.9% but well above the pharmaceutical industry median of -19.7%, indicating healthy profitability. Gross margin was 66.4%, high but down 1.7pt from 68.1%, needing monitoring for rising cost trends. R&D expense remained aggressive at 21.5% of Revenue (prior 21.4%). [Cash Quality] Operating Cash Flow (OCF) was ¥272.2B, or 0.92x of Net Income ¥297.2B, generally healthy but down 24.6% YoY. OCF/EBITDA fell to 0.65x from 0.85x, with working capital expansion suppressing cash conversion efficiency. Free Cash Flow was ¥292.0B and comfortably covers dividend payments of ¥83.5B. [Investment Efficiency] Total Asset Turnover was 0.49x (prior 0.56x), indicating room to improve asset efficiency. Inventories rose significantly to ¥515.9B (prior ¥425.0B, +21.4%), making inventory management a priority. [Financial Soundness] Equity Ratio was very high at 84.2% (prior 87.1%), with debt-free operations maintained. Current ratio stood at 434.9%, indicating ample liquidity, and Cash and Cash Equivalents rose to ¥765.9B (prior ¥552.4B, +38.6%).
OCF decreased to ¥272.2B (YoY -24.6%). In converting Profit Before Tax of ¥364.6B to cash, increases in inventories (-¥89.7B) and trade receivables (-¥35.8B) were the main detractors, partially offset by an increase in trade payables (+¥74.2B). Income tax payments rose to ¥102.4B (prior ¥81.4B), increasing cash outflows. Investing Cash Flow was a positive ¥19.8B, as proceeds from disposals and redemptions of ¥64.4B exceeded capital expenditures of ¥29.8B. Last year’s substantial negative outflow for intangible asset acquisitions of ¥314.4B was reduced to ¥8.0B this year, suggesting major intellectual property investments have largely completed. Financing Cash Flow was -¥99.3B, primarily reflecting dividend payments of ¥83.5B and lease liability repayments of ¥15.7B. With foreign exchange translation effects of +¥20.7B, Cash and Cash Equivalents increased by ¥213.5B to ¥765.9B at period-end. FCF of ¥292.0B is ample, covering dividends 3.5x. The decline in OCF driven by working capital expansion appears temporary, but inventory and receivables optimization will be key to future cash generation.
Against Operating Income of ¥355.0B, Financial Income of ¥11.3B (0.7% of Revenue) and Other Income of ¥30.3B (1.8% of Revenue) bolstered Ordinary Income. Other Income rose substantially from ¥8.7B last year and may include one-off factors. Financial Income is mainly interest and dividend income and is of a recurring nature. Income taxes of ¥67.3B represent an effective tax rate of 18.5% on Profit Before Tax of ¥364.6B, up 8.6pt from 9.9% a year earlier, with higher tax burden reducing Net Income. OCF of ¥272.2B is 0.92x of Net Income ¥297.2B, generally consistent, but working capital increases (inventories -¥89.7B, receivables -¥35.8B) have emerged on an accrual basis and somewhat lowered cash backing quality. OCF/EBITDA of 0.65x worsened from 0.85x last year, so normalization of working capital is essential to improve earnings quality. Special gains/losses had limited impact, and the company’s recurring earnings structure remains intact.
For FY ending March 2027, the company forecasts Revenue ¥2000.0B (YoY +17.1%), Operating Income ¥380.0B (YoY +7.0%), Net Income attributable to owners of the parent ¥303.0B (YoY +1.9%), EPS ¥449.55, and Dividend ¥62.00. At the half-year point, progress rates were Revenue 85.4%, Operating Income 93.4%, and Net Income 98.1%, indicating performance ahead of plan on profitability metrics. The plan assumes double-digit Revenue growth next year but a lower Operating margin of 19.0% (vs. 20.8% this year, -1.8pt), reflecting a conservative assumption incorporating continued increases in R&D spending. The projected Dividend of ¥62 aligns with the current annual dividend of ¥124 (interim ¥62 + year-end ¥62), maintaining a stable dividend policy.
Annual dividend is ¥124 (interim ¥62, year-end ¥62), unchanged from the prior year. With Net Income attributable to owners of the parent of ¥297.2B and EPS ¥441.00, the Payout Ratio is 28.1%, a conservative level. Total dividends amounted to ¥83.5B, and coverage by Free Cash Flow of ¥292.0B is 3.5x, indicating high sustainability. No share buybacks were conducted. While the company currently returns capital through dividends only, ROE of 11.0% and an Equity Ratio of 84.2% provide a strong capital base, leaving room for potential future dividend increases. Next fiscal year’s dividend forecast is ¥62, implying continuation of the same interim and year-end dividend level for the full year.
Working capital expansion risk: Inventories rose to ¥515.9B (YoY +21.4%) and trade receivables to ¥461.6B (YoY +9.1%), contributing to a deterioration in OCF of -24.6% YoY. Continued inventory stagnation or delays in receivables collection could further weaken cash generation and deteriorate capital efficiency.
Margin compression risk: Gross margin fell to 66.4% from 68.1% a year earlier, and SG&A increased 14.6% YoY, far outpacing Revenue growth of 6.6%. Continued cost and expense pressures could compress Operating margin (20.8% vs. 22.1% prior) further and lead to ROE decline.
Deterioration in Functional Foods profitability: Operating Income for the Functional Foods Business declined significantly to ¥8.6B (prior ¥12.7B, -32.3%), with Operating margin down to 3.8% (prior 5.9%). Failure to improve profitability in this business could hinder overall company profit growth.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| ROE | 11.0% | -19.7% (-58.1%–4.6%) | +30.7pt |
| Operating Margin | 20.8% | -94.2% (-358.4%–8.6%) | +115.0pt |
| Net Margin | 17.4% | -101.5% (-373.7%–5.9%) | +118.9pt |
Profitability metrics are highly superior within the industry, demonstrating stable profit-generating capability.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 6.6% | -0.6% (-22.4%–13.3%) | +7.2pt |
Revenue growth rate exceeds the industry median, indicating a steady growth trend.
※ Source: Company compilation
Backed by high profitability and a strong financial position, the company continues R&D investment while maintaining stable profit generation. With ROE 11.0%, Operating margin 20.8%, and Equity Ratio 84.2%, the company has a superior financial profile within the pharmaceutical industry. Management plans for Revenue ¥2000B (+17.1%) and Operating Income ¥380B (+7.0%) next year, indicating significant medium-term growth potential.
Working capital expansion has emerged as a short-term issue, with inventories +21.4% and receivables +9.1% leading to OCF down -24.6% YoY. OCF/EBITDA of 0.65x (prior 0.85x) shows declining cash conversion efficiency, and inventory/receivables optimization is essential to improve cash generation. The deterioration in Functional Foods profitability (Operating margin 3.8%, prior 5.9%) also requires structural improvement.
This report is an earnings analysis document automatically generated by AI based on XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by the Company based on public financial statements. Investment decisions are your own responsibility; please consult a professional advisor as needed before making any investment decisions.