ROHTO PHARMACEUTICAL CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥164.26B
• Operating Income: ¥19.32B
• Net Income: ¥17.77B
• EPS: ¥78.12

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

Verdict: FY2026 Q2 was solid on topline growth and bottom-line expansion aided by non-operating gains, but showed modest operating margin compression. Revenue rose 18.1% YoY to 1,642.6, demonstrating strong demand across core categories. Operating income increased 8.6% YoY to 193.2, lagging sales growth due to higher SG&A, implying some reinvestment and/or cost pressures. Ordinary income surged 32.4% YoY to 246.1 as non-operating income (64.3) — notably dividend income of 41.3 and interest income of 4.9 — provided a sizable lift. Net income advanced 36.6% YoY to 176.5, with an effective tax rate of 24.5%, benefiting from the stronger ordinary income base. Gross profit was 911.8, implying a gross margin of 55.5%. The operating margin was 11.8% versus roughly 12.8% in the prior-year period, signaling approximately 100 bps of compression. EBITDA was 263.9, translating to an EBITDA margin of 16.1%, indicating healthy operating cash generation capacity. Operating cash flow of 180.8 slightly exceeded net income (OCF/NI 1.02x), suggesting broadly good earnings quality. Liquidity remains strong with a current ratio of 217% and quick ratio of 183%; cash and deposits of 782.4 comfortably exceed short-term loans of 201.4. Leverage is conservative with a reported D/E of 0.51x and interest coverage of 32.1x. Balance sheet strength is underpinned by 2,922.7 of equity and 1,199.5 of working capital. ROE is 6.0% per DuPont (10.8% net margin × 0.373 asset turnover × 1.51x leverage), reflecting modest leverage and a consumer-health mix that is less asset-intensive than pharma but still capex and brand-investment heavy. A notable watchpoint is the sizable contribution from non-operating income (non-operating income ratio 36.4%), which may not be recurring at the same pace. Forward-looking, sustained growth will likely hinge on maintaining gross margin resilience while normalizing SG&A intensity and reducing dependence on investment income. Overall, quality of earnings looks acceptable, and the balance sheet offers flexibility to invest for growth and support shareholder returns.

Profitability Analysis

ROE decomposition (DuPont): ROE 6.0% = Net Profit Margin 10.8% × Asset Turnover 0.373 × Financial Leverage 1.51x. The most impactful component in this quarter’s earnings dynamics was the net profit margin uplift at the ordinary and net levels driven by non-operating income, despite operating margin compression. Business drivers include strong revenue growth across products supporting gross profit, offset by elevated SG&A (e.g., marketing/brand investments and possible inflationary costs), while dividend and interest income materially boosted ordinary income. The expansion at the ordinary income level is partly non-operational in nature and thus less likely to be fully repeatable; sustainability depends on investment income stability and financial market conditions. Operating leverage was less favorable (OP up 8.6% vs revenue up 18.1%), indicating SG&A growth outpaced revenue — a watchpoint for margin discipline. Given modest leverage (1.51x) and subdued asset turnover (0.373), future ROE improvements will more likely come from operating margin recovery and/or better asset utilization rather than balance-sheet leverage.

Growth Assessment

Topline growth of 18.1% YoY (to 1,642.6) reflects robust demand momentum. Operating profit grew 8.6% YoY to 193.2, trailing sales growth due to higher SG&A intensity, implying reinvestment for growth and/or cost pressures. Ordinary income growth of 32.4% and net income growth of 36.6% benefited materially from non-operating income (dividends 41.3, interest 4.9). Gross margin of 55.5% remains healthy for a consumer health/OTC portfolio, but operating margin compressed ~100 bps YoY to 11.8%. EBITDA margin at 16.1% shows solid cash earnings capacity. Outlook hinges on balancing brand investment with operating discipline; if SG&A productivity improves, operating margins can stabilize or recover. Non-operating income is a swing factor; any normalization of dividends or financial gains could moderate profit growth. Net income growth quality is acceptable given OCF ≥ NI, but profit composition is more mixed given the elevated non-operating contribution.

Financial Health

Liquidity is strong: current ratio 217.3% and quick ratio 182.9%, with cash and deposits (782.4) well above short-term loans (201.4). No warning on current ratio (<1.0) or leverage (D/E > 2.0); reported D/E is 0.51x and interest coverage is a robust 32.1x. Maturity mismatch risk appears low: current assets of 2,222.3 comfortably exceed current liabilities of 1,022.8, and cash provides ample near-term coverage of short-term debt. Total liabilities are 1,476.4 against equity of 2,922.7, underlining balance sheet resilience. No off-balance sheet obligations were reported in the provided data.

Cash Flow Quality

OCF of 180.8 versus net income of 176.5 yields an OCF/NI ratio of 1.02x, clearing the >1.0 quality threshold. While total investing CF was unreported, disclosed capital expenditures were 52.3; an indicative FCF proxy (OCF − Capex) would be approximately 128.4, suggesting capacity to fund dividends and reinvestment, subject to other investing outflows. Working capital appears reasonably managed given OCF ≈ NI; no clear signs of aggressive working capital pull-forwards are evident from the limited data. Financing CF of -92.8 indicates net outflows (likely debt repayment and/or shareholder returns), consistent with the company’s strong liquidity. Overall, cash conversion is sound this quarter.

Dividend Sustainability

The calculated payout ratio is 48.2%, within the <60% sustainability benchmark. Although total dividends and DPS were unreported, the payout ratio suggests the dividend is currently covered by earnings. Using the indicative FCF proxy (OCF − Capex ≈ 128.4), dividend coverage appears adequate, assuming no unusually large undisclosed investing outflows. Balance sheet strength (cash 782.4, low leverage) provides additional cushion. Policy outlook is not disclosed, but current metrics imply room to maintain or modestly grow dividends if earnings and cash generation remain stable.

Risk Assessment

Business Risks:

• Operating margin compression (~100 bps YoY) from higher SG&A intensity
• Dependence on non-operating income (dividends/interest) to boost ordinary income
• Input cost inflation and FX-driven COGS volatility affecting gross margin
• Competitive pressure in OTC eye care and skincare requiring sustained A&P spend
• Regulatory and quality/compliance risk across multiple geographies and product categories

Financial Risks:

• Potential normalization of dividend income reducing ordinary profit leverage
• FX translation risk on overseas revenues and assets
• Goodwill (330.2) and intangible assets (678.1) represent impairment risk if growth slows
• Interest rate risk on refinancing of short-term loans (201.4), albeit mitigated by cash holdings

Key Concerns:

• Profit composition skewed by non-operating income in the quarter (non-operating income ratio 36.4%)
• Subdued asset turnover (0.373) limiting ROE despite healthy net margin
• ROIC at 6.2% below typical 7–8% target range, implying room for capital efficiency improvement

Investment Implications

Key Takeaways:

• Strong sales growth (+18.1%) with healthy gross margin (55.5%)
• Operating margin compressed to 11.8% as SG&A outpaced revenue
• Ordinary and net income were boosted by sizable non-operating income (dividends/interest)
• Cash generation quality is solid (OCF/NI 1.02x) and liquidity is strong (current ratio 217%)
• ROE at 6.0% is constrained by low asset turnover and modest leverage; ROIC 6.2% suggests efficiency upside

Metrics to Watch:

• Operating margin trajectory and SG&A-to-sales ratio
• Sustainability of dividend income and other non-operating gains
• Gross margin resilience amid input cost and FX fluctuations
• Working capital turns (AR 488.2, inventories 351.7) and cash conversion cycle
• Capital allocation: capex discipline, M&A impact on goodwill/intangibles, and ROIC improvement

Relative Positioning: Within consumer health/OTC peers, Rohto shows above-trend revenue growth, strong liquidity, and conservative leverage, but faces pressure on operating margins and relies more on non-operating income this quarter; improving SG&A productivity and capital efficiency would strengthen its relative standing.

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
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