Eisai Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥400.01B
• Operating Income: ¥34.42B
• Net Income: ¥25.87B
• EPS: ¥87.37

Income Statement

Balance Sheet

Cash Flow Statement

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

Eisai Co., Ltd. (IFRS, consolidated) delivered FY2026 Q2 results showing modest top-line growth and strong operating leverage. Revenue rose 3.9% YoY to 4,000.13, while operating income increased 23.6% to 344.18, indicating disciplined cost control beneath a high gross margin structure. Gross profit was 3,118.89, implying a gross margin of 78.0%, consistent with a high-value, innovation-led pharma mix. Operating margin improved to 8.6%, aided by SG&A intensity at approximately 51% of sales and supported by contained D&A of 195.06. Net income reached 246.30 (+13.5% YoY), with an effective tax rate of roughly 30.0% (110.66/369.36). DuPont decomposition yields a net margin of 6.2%, asset turnover of 0.278x, and financial leverage of 1.63x, resulting in ROE of 2.8% (in line with the reported figure), highlighting that profitability, not leverage, is the primary current driver of returns. EBITDA was 539.24 (13.5% margin), signaling improved operating earnings capacity versus prior year. Cash generation was adequate but not exceptional: operating cash flow of 222.73 equated to 0.90x of net income, and reported free cash flow was 94.34, constrained by working capital dynamics. The balance sheet remains solid with total assets of 14,379.98 and equity of 8,797.70 (equity ratio 59.4%), indicating a conservative capital structure. Liabilities of 5,582.28 imply a liabilities-to-equity ratio near 0.63x; interest-bearing debt components total 2,366.65, partially offset by cash and equivalents of 3,016.46, suggesting a likely net cash position. Inventories (2,364.61) and receivables (2,240.56) are sizable relative to revenue and cost of sales, warranting monitoring for working-capital discipline as product mix evolves. Dividend-related metrics appear elevated: the provided “calculated payout ratio” is 189.5% and “FCF coverage” is 0.20x, while the cash flow statement shows dividends paid of 225.69, implying a payout of roughly 92% of net income and coverage of about 0.4x on the reported FCF—methodological differences should be reconciled. Overall, the quarter evidences improving margin quality and operating leverage, but cash conversion and dividend affordability bear watching. Data gaps exist (ordinary income, non-operating items, R&D, interest expense, current liabilities), limiting precision in some assessments. Despite these limitations, the results point to a business benefiting from operating scale with a robust balance sheet, yet with near-term strain on FCF coverage of shareholder returns.

Profitability Analysis

ROE_decomposition: Net profit margin 6.2% x asset turnover 0.278 x financial leverage 1.63x = ROE 2.8%. The ROE is predominantly constrained by modest net margins and slow asset turnover, with limited reliance on leverage. margin_quality: Gross margin is very high at 78.0%, consistent with a branded pharmaceutical portfolio. Operating margin improved to 8.6% (344.18/4,000.13), indicating SG&A discipline and operating leverage. EBITDA margin at 13.5% reflects healthy operating earnings before D&A. The effective tax rate is stable near 30%. Non-operating items are unreported, so below-OP contributions/drag cannot be assessed. operating_leverage: Revenue grew 3.9% YoY versus operating income up 23.6%, evidencing positive operating leverage. SG&A was 2,040.27 (about 51% of sales); the gap between gross profit and SG&A+D&A expanded, lifting OP. Future leverage sensitivity will depend on R&D and launch investments (R&D is unreported).

Growth Assessment

revenue_sustainability: Top-line growth of 3.9% appears steady. The high gross margin suggests mix support from higher-value therapies, but sustainability cannot be verified without product/segment detail. profit_quality: OP growth (23.6%) outpaced revenue, implying cost leverage rather than price/mix alone. EBITDA expansion to 13.5% margin supports quality of earnings, though lack of disclosure on R&D and non-operating items limits full quality assessment. outlook: Absent guidance and R&D detail, the near-term outlook hinges on maintaining SG&A efficiency and stable tax rate while managing working capital. Sustained mid-single-digit revenue growth with controlled opex could support gradual ROE improvement.

Financial Health

liquidity: Current assets are 7,906.96; current liabilities are unreported, so current and quick ratios cannot be calculated. Cash and equivalents stand at 3,016.46, providing meaningful liquidity. solvency: Total liabilities are 5,582.28 versus equity 8,797.70 (approximately 0.63x liabilities-to-equity). Short-term loans are 1,019.12 and long-term loans 1,347.53 (total 2,366.65). With cash of 3,016.46, the company likely holds a net cash position on an interest-bearing basis. capital_structure: Equity ratio is 59.4%, indicating a conservative balance sheet. Financial leverage in DuPont is 1.63x (assets/equity), consistent with low balance sheet risk.

Cash Flow Quality

earnings_quality: OCF/Net Income is 0.90x (222.73/246.30), a reasonable but slightly soft conversion, likely reflecting working capital build (notably inventories and receivables). FCF_analysis: Free cash flow is reported at 94.34. Capex is 69.98, modest relative to revenue (about 1.7%). The gap between OCF and FCF suggests additional investing outflows beyond capex or timing effects. working_capital: Receivables of 2,240.56 and inventories of 2,364.61 are high relative to revenue and cost of sales (inventories ~2.7x cost of sales), implying cash tied up in operations. Accounts payable is 807.29, offering some offset but likely not fully funding the WC build.

Dividend Sustainability

payout_ratio_assessment: The provided calculated payout ratio is 189.5%, indicating potential overdistribution relative to earnings. Using reported cash dividends paid (225.69) vs net income (246.30) implies roughly a 92% payout, still elevated for a pharma with ongoing R&D needs. FCF_coverage: Provided FCF coverage is 0.20x; however, using reported FCF of 94.34 and cash dividends of 225.69 implies coverage near 0.4x. Either way, dividends appear undercovered by FCF in this period. policy_outlook: Without DPS disclosure or explicit policy, the sustainability of current cash returns depends on improved OCF conversion or lower investment outflows. Monitoring alignment of dividend policy with FCF generation is essential.

Risk Assessment

Business Risks:

• Product mix and pricing pressure in key therapeutic areas
• Regulatory and approval timing risks impacting revenue cadence
• Patent expiry and generic/biosimilar competition risk
• R&D execution and clinical trial outcomes
• Supply chain and inventory management risks given elevated inventories
• Foreign exchange volatility affecting overseas revenues and costs

Financial Risks:

• Undercoverage of dividends by FCF in the period
• Working capital intensity dampening cash conversion
• Potential interest rate exposure on loans (interest expense unreported)
• Limited visibility on non-operating items and lease liabilities

Key Concerns:

• Low ROE at 2.8% despite solid margins, constrained by asset turnover
• OCF/NI below 1.0x and sizable inventories weighing on cash generation
• Dividend payout elevated relative to both earnings and FCF

Investment Implications

Key Takeaways:

• Revenue up 3.9% with strong operating leverage lifting OP by 23.6%
• High gross margin (78%) and improving OP margin (8.6%) support earnings quality
• ROE remains low at 2.8%, limited by asset turnover and conservative leverage
• OCF conversion at 0.90x is acceptable but pressured by working capital
• Balance sheet robust with equity ratio 59.4% and likely net cash
• Dividend distribution appears high relative to FCF in this period

Metrics to Watch:

• R&D expense disclosure and intensity
• OCF/Net income and working capital trends (AR, inventory, AP)
• EBITDA and operating margin trajectory
• Dividend cash outflows versus FCF
• Asset turnover improvement and ROE progression
• Any updates on non-operating income/expenses and interest expense

Relative Positioning: Within Japan pharma peers, Eisai exhibits premium gross margins and a conservative balance sheet, but currently delivers modest ROE and cash conversion that lags dividend outlays; sustaining margin gains while improving working capital efficiency would enhance its relative financial profile.

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