ROHTO PHARMACEUTICAL CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥164.26B
• Operating Income: ¥19.32B
• Net Income: ¥12.81B
• 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

Rohto Pharmaceutical (4527) reported robust topline expansion in FY2026 Q2, with revenue of ¥164.3bn, up 18.1% YoY, indicating strong demand across core categories such as eye care and skincare/dermocosmetics. Gross profit reached ¥78.5bn, translating to a high gross margin of 47.8%, underscoring solid product mix and pricing discipline despite input cost volatility. Operating income rose 8.6% YoY to ¥19.3bn, implying operating margin of 11.8%; this lagged sales growth, suggesting higher SG&A investment (e.g., marketing, channel expansion) or inflationary pressure in logistics and personnel. Ordinary income of ¥24.6bn exceeded operating income by ¥5.3bn, pointing to meaningful non-operating gains (e.g., FX, investment income), which also helped drive net income up 36.6% YoY to ¥17.7bn. The net margin of 10.75% is healthy for a consumer healthcare/OTC mix, though part of the lift appears non-recurring or non-operational. DuPont ROE printed at 6.04% (net margin 10.75% × asset turnover 0.373 × leverage 1.51), reflecting solid profitability but modest asset efficiency typical for diversified consumer health businesses. Asset turnover of 0.373 indicates a capital-light-to-moderate profile with room for efficiency gains as scale builds. Financial leverage at 1.51x (assets/equity) is conservative and supports resilience through cycles. Cash generation was positive with operating cash flow (OCF) of ¥14.0bn; however, OCF/Net Income at 0.79 suggests working capital absorption amid rapid growth. Liquidity remains strong, with a current ratio of 230% and quick ratio of 192%, and working capital of ¥123.3bn, indicating ample near-term coverage. Solvency is robust with a debt-to-equity ratio of 0.53x and interest coverage of ~151x, implying minimal refinancing risk. EBITDA was ¥23.6bn (14.4% margin), with D&A at ¥4.3bn (2.6% of sales), consistent with manageable capital intensity. The effective tax rate shown as 0.0% is clearly a disclosure limitation; using reported income tax of ¥5.8bn against ordinary income implies a normalized tax burden in the low-to-mid 20s. Several data points are unreported (equity ratio, cash balance, investing cash flows, DPS, share counts), limiting per-share and FCF-based dividend analysis. Overall, Rohto demonstrates strong topline momentum, resilient margins, and a very strong balance sheet, albeit with signs of elevated SG&A investment and working capital needs. Sustainability of non-operating gains will be a key determinant of bottom-line trajectory. Continued monitoring of inventory and receivables efficiency is warranted to ensure cash conversion keeps pace with earnings. Despite data gaps, the quality of core earnings appears sound, with a disciplined capital structure that can support growth and shareholder returns over time.

Profitability Analysis

ROE_decomposition: ROE 6.04% = Net Margin 10.75% × Asset Turnover 0.373 × Financial Leverage 1.51. Net income ¥17.7bn on revenue ¥164.3bn yields a healthy net margin. Asset turnover of 0.373 (sales/ending assets) is moderate; leverage of ~1.51x (assets/equity) indicates conservative capital structure. margin_quality: Gross margin 47.8% (¥78.5bn/¥164.3bn) is strong, indicating favorable mix and pricing. Operating margin 11.8% (¥19.3bn/¥164.3bn) expanded slower than sales, implying higher SG&A or cost inflation. Net margin 10.75% benefited from non-operating gains (ordinary income exceeds operating income by ¥5.3bn) and a normalized tax burden likely in the low-20% range (tax expense ¥5.8bn), despite an unreported effective tax rate in the provided metrics. operating_leverage: Revenue +18.1% YoY vs operating income +8.6% YoY suggests negative operating leverage in the period, likely due to stepped-up marketing, R&D or channel investments, and/or cost inflation. EBITDA margin of 14.4% vs operating margin 11.8% indicates modest non-cash burden (D&A at 2.6% of sales).

Growth Assessment

revenue_sustainability: Topline growth of +18.1% YoY is robust for OTC/consumer health, likely driven by brand strength in eye care and skincare and possibly geographic expansion. Sustainability will hinge on continued product innovation, channel penetration (including e-commerce), and competitive pricing. profit_quality: Operating income growth (+8.6% YoY) lagged sales, suggesting reinvestment. Net income growth (+36.6% YoY) likely reflects favorable non-operating items (¥5.3bn gap between ordinary and operating income) and a normal tax outcome, so underlying operating growth is more modest than bottom-line growth. outlook: With high gross margins and strong balance sheet support, Rohto can continue investing in growth while maintaining double-digit operating margins. Key watchpoints include FX volatility, input costs, and the trajectory of SG&A efficiency to restore positive operating leverage.

Financial Health

liquidity: Current ratio 230.3% (¥217.9bn/¥94.6bn) and quick ratio 191.8% (excluding inventories of ¥36.4bn) indicate strong short-term liquidity. Working capital stands at ¥123.3bn, providing ample buffer for seasonal and growth-related needs. solvency: Debt-to-equity is 0.53x (total liabilities ¥156.3bn / equity ¥292.3bn), indicating conservative leverage. Interest coverage ~151x (operating income ¥19.3bn / interest expense ¥0.13bn) suggests very low financial risk. capital_structure: Implied equity ratio is approximately 66.5% (equity ¥292.3bn / assets ¥439.9bn), despite the provided metric showing 0.0% due to disclosure limitations. Financial leverage of 1.51x aligns with a resilient balance sheet and capacity for continued investment.

Cash Flow Quality

earnings_quality: OCF/Net Income is 0.79 (¥14.0bn/¥17.7bn), indicating cash conversion below 1.0, likely from working capital build consistent with rapid sales growth (higher inventories/receivables). Core profitability appears supported by cash earnings but with some timing drag. FCF_analysis: Investing cash flow is unreported (0), so free cash flow cannot be reliably derived. D&A of ¥4.3bn suggests ongoing capex needs; without capex data, FCF coverage metrics are not meaningful. working_capital: Inventories are ¥36.4bn; without prior-period comparatives, magnitude of build is unknown. The strong quick ratio indicates liquid current assets beyond inventory, but sustained revenue growth may keep working capital elevated near term.

Dividend Sustainability

payout_ratio_assessment: Annual DPS and payout ratio are shown as 0.0%, which likely reflects missing disclosures rather than actual zero dividends. With net income of ¥17.7bn and conservative leverage, there appears capacity for distributions, but actual policy cannot be assessed from provided data. FCF_coverage: FCF Coverage shown as 0.00x is not meaningful given unreported investing cash flows; hence, we cannot evaluate dividends against FCF. policy_outlook: Historically, companies in this segment balance reinvestment with stable dividends; however, absent DPS and capex/FCF data, we cannot infer changes to payout policy. Monitoring official guidance and full-year dividend announcements is necessary.

Risk Assessment

Business Risks:

• Intense competition in OTC eye care and skincare/dermocosmetics affecting pricing and share
• Input cost volatility (active ingredients, packaging, logistics)
• FX fluctuations given overseas revenue contribution
• Regulatory and quality compliance risks across multiple jurisdictions
• Brand and product lifecycle risk requiring continuous innovation
• Channel mix shifts (e-commerce vs. offline) impacting margins
• China and other Asian market demand variability and regulatory dynamics

Financial Risks:

• Working capital absorption during high growth periods weighing on cash conversion
• Potential normalization of non-operating gains reducing net income vs. operating trend
• Interest rate increases could modestly raise financing costs, though current interest burden is low
• Currency translation and transaction impacts on margins and ordinary income

Key Concerns:

• Operating leverage turned negative this quarter (OI growth < sales growth)
• OCF below net income (0.79x) suggests cash conversion pressure from WC
• Bottom-line aided by non-operating items; sustainability uncertain
• Key cash flow items (investing CF, cash balance) and dividend data are unreported

Investment Implications

Key Takeaways:

• Strong topline momentum (+18.1% YoY) with high gross margin (47.8%)
• Operating margin 11.8%; reinvestment or cost pressures muted operating leverage
• Net income growth (+36.6% YoY) boosted by non-operating gains (ordinary > operating by ¥5.3bn)
• Robust balance sheet: D/E 0.53x, interest coverage ~151x, implied equity ratio ~66.5%
• Cash conversion below earnings (OCF/NI 0.79) amid growth-driven working capital needs
• Data gaps (cash, investing CF, DPS, shares) limit FCF and per-share analysis

Metrics to Watch:

• SG&A-to-sales ratio and marketing ROI to restore operating leverage
• OCF/Net Income ratio and free cash flow once capex is disclosed
• Inventory and receivables days to assess working capital discipline
• Gross margin trajectory vs. input cost and FX movements
• Non-operating income components and sustainability
• Leverage (D/E) and equity ratio to monitor balance sheet flexibility
• Full-year dividend guidance and capital allocation updates

Relative Positioning: Within Japanese consumer health/OTC peers, Rohto exhibits above-average gross margins and a conservative balance sheet, with growth outpacing many incumbents; the main differentiators to monitor are sustained brand-led revenue growth versus near-term operating leverage and cash conversion normalization.

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