Quick View
| Metric | Current Period | Same Period Last Year | YoY |
|---|---|---|---|
| Revenue | ¥91.62B | ¥81.96B | +11.8% |
| Operating Income | ¥13.66B | ¥11.70B | +16.8% |
| Ordinary Income | ¥14.49B | ¥16.13B | −10.1% |
| Net Income | ¥11.05B | ¥12.05B | −8.3% |
| ROE | 3.4% | 3.8% | - |
Executive Summary
The April–June 2026 period (Q1) was a quarter characterized by “strong operating performance but a decline in the bottom line due to a reversal effect,” as Revenue and Operating Income increased while Ordinary Income and Net Income declined owing to the reversal of high non-operating income recorded in the previous year. Revenue was ¥91.62B (up +11.8% YoY), and Operating Income was ¥13.66B (up +16.8% YoY, with an Operating Income margin of 14.9%, improving by +0.6pt from 14.3% in the previous year). Meanwhile, Ordinary Income was ¥14.49B (down -10.1% YoY), and Net Income attributable to owners of the parent was ¥10.65B (down -9.5% YoY). The primary reason for the decline in profit was the sharp decrease in non-operating income from ¥5.04B to ¥1.49B, as dividend income declined from ¥4.11B in the same period of the previous year to ¥0.81B in the current period.
Factors Affecting Results
【Revenue】Revenue of ¥91.62B increased by +11.8% YoY, marking double-digit growth. By segment, Asia at ¥36.55B (+17.4%) and Europe at ¥6.79B (+20.8%) led growth, while the core Japan segment also remained solid at ¥43.81B (+4.7%). The Americas generated ¥5.88B (+8.5%), while Other, outside the reportable segments, generated ¥1.01B (+13.6%), with all regions securing Revenue growth.
【Profit and Loss】Operating Income was ¥13.66B (+16.8%), as the +11.0% increase in SG&A expenses was below the +11.8% growth in Revenue, resulting in operating leverage. The gross margin improved by +0.3pt to 56.3% (56.0% in the previous year), apparently reflecting effective cost-of-sales management and product mix. Meanwhile, Ordinary Income of ¥14.49B (-10.1%) declined primarily due to the decrease in non-operating income resulting from lower dividend income (¥4.11B → ¥0.81B), while Profit Before Tax remained at ¥14.80B (-1.8%). The effective tax rate increased to 25.4% from 20.0% in the previous year, and income taxes increased to ¥3.75B from ¥3.02B. Extraordinary income was limited to a modest gain on the sale of investment securities of ¥0.31B, and its impact on Net Income was limited to a minor temporary factor. In conclusion, the operating level delivered higher Revenue and Operating Income, while Ordinary Income and Net Income declined due to the reversal of non-recurring non-operating income; overall, the results are classified as higher Revenue but lower profit.
Segment Analysis
Japan (the largest segment by composition) generated Revenue of ¥43.81B (+4.7%) and Operating Income of ¥6.87B (+8.8%), with a profit margin of 15.7% (15.1% in the previous year), achieving moderate Revenue and profit growth while maintaining profitability. Asia generated Revenue of ¥36.55B (+17.4%) and Operating Income of ¥5.68B (+18.8%), with a profit margin of 15.5% (15.3% in the previous year), driving growth as one of the two main pillars alongside Japan. Europe recorded sharp expansion, with Revenue of ¥6.79B (+20.8%) and Operating Income of ¥0.66B (+395.5%); its profit margin improved substantially to 9.8% from 2.4% in the previous year. Although its scale is small, the improvement in its earnings structure is notable. The Americas generated Revenue of ¥5.88B (+8.5%) and Operating Income of ¥0.23B (+22.8%), with a profit margin of 3.8% (3.4% in the previous year), remaining on a growth trajectory but at a lower level than the other regions. With all reportable segments achieving higher Revenue and Operating Income, the sustainability of Europe’s margin improvement will be a key focus going forward.
Key Financial Metrics
【Profitability】The Operating Income margin was 14.9%, improving by +0.6pt from 14.3% in the previous year, while the gross margin also rose by +0.3pt to 56.3% (56.0% in the previous year). In contrast, the Net Income margin (on a basis attributable to owners of the parent) was 11.6%, down -2.8pt from 14.4% in the previous year, reflecting the impact of lower non-operating income.【Cash Flow Quality】Days sales outstanding (DSO) was 50.4 days (58.5 days in the previous year), days inventory outstanding (DIO) was 86.5 days (96.1 days in the previous year), and the cash conversion cycle (CCC) was 83.8 days (101.8 days in the previous year). All three metrics shortened from the previous year, indicating an improving trend in working capital efficiency.【Investment Efficiency】ROE was 3.4% (quarterly actual), while total asset turnover was approximately 0.19x and has been gradually increasing in line with Revenue growth.【Financial Soundness】The Equity Ratio remained high at 67.4% (approximately 66.0% in the previous year), while the current ratio was 216.8% and the quick ratio was 181.6%, indicating strong short-term payment capacity. Interest-bearing debt was modest, comprising short-term borrowings of ¥22.15B and long-term borrowings of ¥2.71B. The ratio of Operating Income to interest expense (¥0.32B) was 42.7x, indicating a conservative financial structure.
Cash Flow Analysis
Cash and deposits were ¥84.77B, virtually unchanged at -2.4% compared with the end of the same period of the previous year. Short-term borrowings were ¥22.15B, down -10.5% YoY, indicating progress in reducing interest-bearing debt. Investment securities increased by +4.9% to ¥58.64B, suggesting that a portion of funds was allocated to investment assets. Income taxes payable decreased by -32.6% YoY to ¥4.43B, reflecting progress in cash outflows related to tax payments. In terms of working capital, both accounts receivable and inventory turnover days shortened from the previous year, indicating an improving trend in the efficiency of cash generation from operating activities. Given the substantial liquidity on hand, reflected in an Equity Ratio of 67.4% and a current ratio of 216.8%, the Company’s ability to meet funding needs for capital expenditures, dividends, and other purposes remains relatively stable.
Quality of Earnings
The primary factor creating the difference between Ordinary Income and Net Income was non-operating income and expenses. Dividend income accounted for ¥0.81B of non-operating income of ¥1.49B, but declined substantially from ¥4.11B in the previous year, making this reversal the central factor behind the declines in Ordinary Income and Net Income. Extraordinary income consisted solely of a gain on the sale of investment securities of ¥0.31B. Although this increased from ¥0.04B in the previous year, the amount was small and did not constitute a temporary factor that materially distorted current-period profit or loss. Comprehensive Income was ¥13.93B, a +¥2.66B variance from Net Income attributable to owners of the parent of ¥10.65B, primarily due to foreign currency translation adjustments of +¥2.66B (−¥5.33B in the previous year). Whereas Comprehensive Income was below Net Income in the previous year due to the yen-appreciation trend, the current period saw Comprehensive Income exceed Net Income as the trend shifted toward yen depreciation. This indicates that foreign exchange valuation had a relatively significant impact on earnings quality during the quarter. The effective tax rate increased to 25.4% from 20.0% in the previous year, and the higher tax burden also contributed to the lack of growth in Net Income.
Earnings Forecast and Guidance
Progress against the full-year plan was 24.6% for Revenue (¥91.62B/¥372.30B), 30.4% for Operating Income (¥13.66B/¥45.00B), 30.6% for Ordinary Income (¥14.49B/¥47.40B), and 30.3% for Net Income attributable to owners of the parent (¥10.65B/¥35.20B). Compared with a simple quarterly allocation benchmark of 25%, Revenue was slightly below the benchmark, while all profit indicators were above it, indicating that profit performance was ahead of schedule as of Q1. The full-year Ordinary Income forecast calls for a -1.2% YoY decline, while the -10.1% decline in Q1 represents a faster pace of decline. However, the full-year plan itself may have been set at a conservative level. Although the earnings forecast was revised during the quarter, there was no revision to the dividend forecast, and the annual dividend forecast remained unchanged at ¥50.
Shareholder Returns
The annual dividend forecast is ¥50 per share, and no revision to the dividend forecast was made during the quarter. Using the weighted-average number of shares outstanding during the period of 225,964 thousand shares, the estimated annual total dividend is approximately ¥11.30B, resulting in an estimated Payout Ratio of approximately 32.1% against the full-year Net Income forecast of ¥35.20B (on a basis attributable to owners of the parent). Considering the financial foundation represented by an Equity Ratio of 67.4% and a current ratio of 216.8%, the current dividend level does not place an excessive burden on the balance of cash and deposits of ¥84.77B.
Risk Factors
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Non-operating income volatility risk: Dividend income declined from ¥4.11B in the same period of the previous year to ¥0.81B in the current period, becoming the primary factor behind the YoY changes in Ordinary Income and Net Income (-10.1% and -9.5%, respectively). Going forward, the structure remains susceptible to quarter-to-quarter fluctuations in Ordinary Income and Net Income due to factors such as the seasonality of dividend receipt timing.
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Regional growth dependency risk: The primary drivers of Revenue growth were Asia (+17.4%) and Europe (+20.8%), with these two regions accounting for more than half of overall growth. Foreign exchange movements and changes in local demand could affect Revenue and profit margins in these regions.
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Increase in retirement benefit obligations: The liability for retirement benefits was ¥2.25B, up +218% YoY (¥0.71B → ¥2.25B). Changes in actuarial assumptions, such as the discount rate, may affect the Company’s financial position going forward.
Industry Benchmark (For Reference; Company Analysis)
Industry Benchmark (pharma)
Profitability and Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Income Margin | 14.9% | 17.5% (6.9%–23.1%) | −2.6pt |
| Net Income Margin | 12.1% | 7.0% (2.5%–15.6%) | +5.0pt |
The Operating Income margin is slightly below the industry median, while the Net Income margin is substantially above the industry median, indicating relatively higher profitability at the Net Income level than at the operating level.
Growth and Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 11.8% | 9.8% (2.9%–13.0%) | +2.0pt |
The Revenue growth rate is above the industry median and is tracking close to the upper bound of the IQR (13.0%).
※Source: Company compilation
Key Takeaways from the Financial Results
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The improvement in the Operating Income margin to 14.9% (from 14.3% in the previous year, +0.6pt) and the gross margin to 56.3% (+0.3pt) indicates a structural improvement in profitability driven by improved pricing and product mix, as well as relative control of SG&A expenses.
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The declines in Ordinary Income and Net Income were primarily attributable to the non-recurring reversal of high dividend income in the previous year (¥4.11B → ¥0.81B), a factor different in nature from the underlying operating performance.
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Full-year progress was 24.6% for Revenue, compared with 30.4% for Operating Income, 30.6% for Ordinary Income, and 30.3% for Net Income. All profit indicators exceeded the Revenue progress rate, indicating that profit generation was ahead of schedule as of Q1.
Theoretical Share Price (Reference Value)
This is a reference range mechanically calculated solely from publicly disclosed data using a residual income model (Ohlson-type, explicit 5-year fade). It is not a forecast of the market share price or a recommendation of any specific investment action.
| Scenario | Theoretical Share Price |
|---|---|
| bear | ¥1,473 |
| base | ¥1,553 |
| bull | ¥1,591 |
| Calculation Assumption | Value |
|---|---|
| Book Value Per Share (BPS) | ¥1,454 |
| Adjusted Forecast EPS | ¥169.0 |
| Cost of Equity r | 9.27% (10-year government bond 2.77% + equity risk premium 6.00% + size premium 0.50%) |
| Residual Income Persistence Factor ω / Explicit Forecast Period | 0.62 / 5 years |
| Assumed Payout Ratio | 32.1% |
| Forecast EPS Confidence Adjustment | ×1.085 (based on the peer industry’s historical guidance achievement rate) |
| Implied PBR / PER | 1.07x / 9.2x |
Sensitivity: ¥1,510–¥1,599 at ±1% for the cost of equity, and ¥1,551–¥1,557 at ±0.1 for ω.
Notes:
- Net assets as of the end of the quarter are used (there is a time discrepancy from the full-year forecast).
- Since net assets include non-controlling interests, the theoretical value may be calculated somewhat higher.
(Calculation model: residual income model / Interest rate reference month: 2026-07 / This value does not forecast or guarantee the future share price)
This report is an earnings analysis document automatically generated by AI based on XBRL earnings summary data. It does not recommend investment in any specific security. The industry benchmarks are reference information compiled by the Company based on publicly available earnings data. Investment decisions should be made at your own discretion and responsibility, after consulting with a professional as necessary.
---End of Report---
AI Financial Analysis
Executive Summary
Rohto Pharmaceutical delivered a strong FY2027 Q1 operating performance, although below-the-line earnings declined because prior-year investment income was unusually high. Revenue increased 11.8% year on year to ¥91.6bn. Operating income rose 16.8% to ¥13.7bn, exceeding the pace of sales growth. Gross profit increased 12.5% to ¥51.6bn. The gross margin improved by 37bp year on year to 56.3%. Operating margin expanded by 64bp to 14.9%, approaching the 15% excellent-profitability benchmark. SG&A increased 11.2% to ¥37.9bn, slightly below revenue growth, indicating favorable operating leverage. Japan and Asia were the principal earnings contributors, with Asia delivering particularly strong profit growth. Ordinary income nevertheless fell 10.1% to ¥14.5bn because dividend income declined to ¥0.8bn from the exceptionally large ¥4.1bn recorded a year earlier. Profit attributable to owners declined 9.5% to ¥10.7bn, and basic EPS fell to ¥47.14. The net margin contracted 274bp year on year to 11.6%, despite the operating-margin improvement. A ¥3.1bn gain on sales of investment securities supported pre-tax income in the current quarter, while the previous year included a ¥10.6bn loss on valuation of investment securities; these non-recurring securities items complicate comparison of reported net income. The effective tax rate rose to 25.4% from approximately 20.0% in the prior-year quarter, further weighing on attributable profit. Comprehensive income rose 79.3% to ¥13.9bn, supported by positive foreign-currency translation and securities valuation movements. Liquidity remains ample, with ¥84.8bn of cash and deposits, a 216.8% current ratio, and cash equal to 3.83x short-term debt. The main balance-sheet operating issue is inventory intensity and the long cash conversion cycle indicated by the quality alerts. Management's full-year forecast implies that Q1 sales progress was broadly normal at 24.6%, while operating-profit progress of 30.4% is ahead of the standard 25% first-quarter run rate. The operating result supports the raised forecast backdrop, but the sustainability of profit growth will depend on continued Asian expansion, gross-margin retention, and normalization of working-capital efficiency.
Profitability Analysis
Annualized DuPont ROE is 13.0%, comprising an 11.6% net profit margin, 0.752x annualized asset turnover, and 1.48x financial leverage. The return profile is therefore driven primarily by a high net margin and moderate leverage rather than aggressive balance-sheet gearing. The operating improvement was broad enough to lift operating income by 16.8%, ahead of the 11.8% revenue increase. Gross margin improved to 56.3% from 55.9%, while operating margin rose to 14.9% from 14.3%. SG&A grew 11.2%, marginally slower than revenue, supporting operating leverage rather than signaling excess cost growth. The largest pressure on reported profitability was below operating income: non-operating income fell sharply as dividend income normalized to ¥0.8bn from ¥4.1bn in the prior-year period. Consequently, ordinary income fell despite higher operating income. The tax burden of 0.719 is within a normal range, and the interest burden of 1.083 reflects net non-operating financial income rather than debt stress. Interest coverage of 42.7x confirms that financing costs do not constrain profitability. JGAAP goodwill amortization is relevant conceptually for acquisitive companies, but the reported figures do not isolate amortization; therefore operating profit remains the directly observable basis for margin assessment. The current 13.0% annualized ROE is good by the stated benchmark, although it remains below the level generally classified as excellent.
Growth Assessment
Revenue growth of 11.8% reflects broad geographic expansion. Japan, the core business by operating-income contribution, generated revenue of ¥428.6bn and segment profit of ¥68.7bn, up 5.2% and 8.8% year on year, respectively; its segment margin improved 53bp to 16.0%. Asia generated revenue of ¥356.0bn and segment profit of ¥56.8bn, up 19.7% and 18.8%, respectively; its 15.9% margin remained close to Japan's and makes Asia the largest incremental earnings driver. Europe recorded the strongest percentage profit improvement: revenue increased 20.0% to ¥66.8bn and segment profit increased nearly fivefold to ¥6.6bn, lifting margin to 9.9% from 2.4%. America grew revenue 8.3% to ¥54.7bn and segment profit 22.8% to ¥2.3bn, but its 4.1% margin remains well below the group’s core regional businesses. Other operations produced revenue of ¥10.0bn, up 18.8%, while segment profit declined 50.0% to ¥0.4bn. The regional mix demonstrates that growth is not dependent on a single market, but the disproportionate contribution from Japan and Asia makes execution in those regions most important. Full-year revenue guidance is ¥3,723.0bn, up 8.3% year on year, and Q1 progress is 24.6%, only 0.4 percentage points below the standard 25% pace. Full-year operating-income guidance is ¥450.0bn, up 9.4%, and Q1 progress is 30.4%, 5.4 percentage points ahead of the standard pace. Ordinary-income and attributable-profit progress rates are both about 30%, indicating a front-loaded Q1 outcome relative to the annual plan but not a deviation exceeding 10 percentage points. The forecast revision indicates management has updated its outlook, while the unchanged dividend forecast suggests capital-return policy has not been revised alongside earnings expectations.
Financial Health
Financial health is strong on reported liquidity and leverage measures. Current assets of ¥234.6bn exceed current liabilities of ¥108.2bn by ¥126.3bn. The current ratio is 216.8% and the quick ratio is 181.6%, both well above healthy thresholds. Total equity of ¥328.5bn represents 67.4% of total assets, and the capital adequacy ratio improved to 63.5% from 62.1% a year earlier. Reported debt-to-equity is 0.48x and debt-to-capital is 7.0%, indicating conservative overall leverage. Interest-bearing loans total ¥24.9bn, and the reported interest coverage ratio of 42.7x provides substantial servicing capacity. Cash of ¥84.8bn is 3.83x short-term debt, mitigating immediate refinancing exposure. However, 89.1% of reported debt is short term, which is the basis for the refinancing-risk alert. This maturity concentration is a potential risk because short-term funding must be rolled over more frequently, even though the present cash buffer and strong current ratio substantially reduce near-term liquidity stress. Convertible bonds with subscription rights of ¥25.3bn are also recorded within current liabilities and should be monitored alongside short-term borrowings when assessing refinancing and potential dilution. Goodwill is ¥34.2bn, equivalent to 10.4% of equity and 7.0% of assets, well below the thresholds associated with material M&A balance-sheet dependence. Total intangible assets are ¥84.0bn, or 17.3% of assets, which remains within the stated balanced range. Lease obligations of ¥7.9bn within non-current liabilities represent a continuing contractual obligation but are modest relative to equity and liquidity.
Notable B/S Changes
Net defined benefit liability: +¥17.4bn (+218%) year on year to ¥22.5bn - a material increase in pension-related obligations that should be monitored, although it remains small relative to ¥328.5bn of total equity.
Cash Flow Quality
Inventory-related operating efficiency is the principal earnings-quality watchpoint. The quality alerts identify inventory days of 154 days and 87 days, both above their respective alert thresholds. Elevated inventory days can tie up cash, increase forecasting risk, and raise the possibility of markdowns or inventory write-downs if consumer demand or regional sell-through weakens. Inventories were broadly stable year on year at ¥38.0bn, but raw-material inventory increased 8.5% to ¥24.2bn, consistent with a need to monitor supply-chain and demand-planning discipline. The quality alerts also indicate a 152-day cash conversion cycle, above the 120-day warning threshold. A long cash conversion cycle means that sales growth requires a relatively large investment in working capital and can delay conversion of accounting earnings into cash. Trade receivables declined 3.6% to ¥50.8bn and electronically recorded monetary claims declined 7.8% to ¥20.5bn, which partly offsets the working-capital concern. Accounts payable increased 11.6% to ¥23.4bn, providing some supplier-financing support to working capital. The combination of high inventory days and a long cash conversion cycle is more significant than the receivables trend and should be monitored as a potential drag on cash generation. The current quarter's reported net income also includes a ¥3.1bn gain on sale of investment securities, which is non-recurring and should not be equated with recurring operating cash generation.
Dividend Sustainability
The full-year dividend forecast is ¥50.00 per share, unchanged following the forecast revision. Against forecast EPS of ¥155.78, the implied dividend payout ratio is approximately 32.1%. This is comfortably below the 60% sustainability benchmark and leaves material earnings retention capacity. Retained earnings totaled ¥261.6bn at quarter end, supporting dividend resilience. The company also has a strong liquidity position, including ¥84.8bn of cash and deposits and a ¥126.3bn working-capital surplus. The dividend outlook is therefore supported by forecast earnings, accumulated retained earnings, and balance-sheet liquidity. The key condition for maintaining this profile is that elevated inventories and the long cash conversion cycle do not materially weaken cash realization during the remainder of the year.
Risk Assessment
Business risks include Asia is the largest incremental growth driver, with revenue up 19.7% and segment profit up 18.8%; a slowdown in regional consumer demand, distribution execution, or local competition would have a meaningful impact on group growth., America's segment margin is only 4.1%, versus approximately 16% in Japan and Asia, leaving the group exposed to execution risk if revenue growth in the region does not translate into sustained profitability., The inventory-days alerts of 154 days and 87 days indicate elevated inventory exposure. In a consumer healthcare and OTC-oriented business, slower sell-through can lead to promotional pressure, obsolescence, or write-down risk., Foreign operations expose earnings and equity to currency movements. Foreign-currency translation adjustments contributed positively to current-period comprehensive income, but this source is inherently volatile., Consumer healthcare and pharmaceutical-related businesses face product-quality, regulatory, healthcare-pricing, and competitive risks; these can affect product availability, marketing claims, and pricing power..
Financial risks include The 89.1% short-term debt ratio triggers the refinancing-risk alert. Although liquidity is strong, concentrated near-term maturities require continued access to funding markets or internal cash., The 152-day cash conversion cycle exceeds the 120-day alert threshold, increasing the amount of capital committed to operations and raising sensitivity of cash flow to inventory movements., A ¥25.3bn convertible bond with subscription rights is included in current liabilities. Refinancing, conversion, or settlement outcomes should be monitored for funding and dilution implications., Investment securities of ¥58.6bn equal 12.0% of total assets. Securities-related gains and valuation changes can create volatility between operating, ordinary, and net income..
Key concerns include Reported net income declined 9.5% despite 16.8% operating-income growth, demonstrating that below-the-line investment income and tax movements can materially affect headline earnings., Current-period pre-tax income includes a ¥3.1bn gain on sale of investment securities, which is not recurring operating profit., The gap between strong operating momentum and weaker net-income growth makes sustained operating-margin expansion, rather than securities gains or dividend income, the key determinant of earnings quality., The high-inventory and long-cash-conversion-cycle alerts are the highest-priority operational monitoring items because they can affect both cash generation and margin resilience..
Investment Implications
Key takeaways include Q1 revenue rose 11.8% and operating income rose 16.8%, producing 64bp operating-margin expansion to 14.9%., Japan remains the core business by segment profit, while Asia provides the largest absolute incremental segment profit and sustained double-digit growth., Full-year operating-income progress of 30.4% is ahead of the standard 25% Q1 pace, whereas revenue progress of 24.6% is broadly in line with plan., Balance-sheet leverage is conservative and liquidity is strong, but debt maturity concentration and working-capital efficiency require monitoring., Headline attributable profit is less representative of core operating momentum because non-operating dividend income normalized and securities gains/losses affected both periods..
Metrics to watch include Asia revenue growth and segment margin, America segment-margin recovery from 4.1%, Operating margin relative to the 15% benchmark, Inventory days and cash conversion cycle, Short-term debt ratio, cash-to-short-term-debt coverage, and treatment of the ¥25.3bn convertible bond, Non-operating dividend income and investment-security gains/losses, Progress against full-year revenue of ¥3,723.0bn, operating income of ¥450.0bn, and attributable profit of ¥352.0bn.
Regarding relative positioning, Rohto exhibits a high-quality operating profile for a diversified consumer healthcare and pharmaceutical-related company, with a 56.3% gross margin, near-15% operating margin, 13.0% annualized ROE, strong liquidity, and low reported debt-to-capital. Its relative strengths are regional diversification and high profitability in Japan and Asia; its relative constraints are lower American profitability, inventory intensity, and the sensitivity of reported net income to non-operating investment-related items.