| Metric | Current Period | Prior Year | YoY |
|---|---|---|---|
| Revenue | ¥974.1B | ¥883.3B | +10.3% |
| Operating Income | ¥-29.3B | ¥57.7B | +43.7% |
| Ordinary Income | ¥-11.6B | ¥69.7B | +13.5% |
| Net Income | ¥125.3B | ¥115.4B | +8.6% |
| ROE | 5.4% | 5.5% | - |
For the fiscal year ended March 2026, Revenue was ¥974.1B (YoY +¥90.8B, +10.3%), Operating Income was ¥-29.3B (YoY -¥87.0B), Ordinary Income was ¥-11.6B (YoY -¥81.3B), and Net Income was ¥125.3B (YoY +¥9.9B, +8.6%). Although revenue increased, core operations turned to an operating loss; however, recognition of special gains totaling ¥182.5B centered on gain on sale of investment securities of ¥170.4B secured a final net profit. Rapid growth in the Information Services Business (+51.2%) drove revenue, while an operating loss of ¥45.2B in the Pharmaceutical Business pressured consolidated profitability. Comprehensive income improved sharply to ¥314.0B (prior year ¥-19.1B), supported by an increase in valuation differences on available-for-sale securities of ¥153.5B.
[Revenue] Revenue of ¥974.1B (+10.3%) achieved double-digit growth. By segment: Pharmaceuticals ¥779.5B (+3.5%), Information Services ¥172.2B (+51.2%), Construction & Facility Maintenance (Trading in data) ¥11.4B (+6.5%). Within Pharmaceuticals, domestic pharmaceuticals ¥677.6B, exports/overseas licensing ¥66.9B (from ¥77.7B prior year, -13.9%), healthcare foods ¥34.9B. Information Services increased substantially by ¥58.3B from ¥113.9B prior year, the largest contributor to company growth. Major customers: Alfresa ¥124.5B (prior year ¥125.2B), S.M.D ¥115.2B ranked high. Revenue composition: Pharmaceuticals 80.0%, Information Services 17.7%, Others 2.3%.
[Profitability] Cost of sales ¥515.9B yielding gross margin 47.0% (from 49.9%, -2.9pt), gross profit ¥458.2B. SG&A ¥487.4B (SG&A ratio 50.0%, from 43.3%, +6.7pt) rose sharply, resulting in an operating loss of ¥29.3B (prior year +¥57.7B), a deterioration of ¥87.0B. Non-operating income ¥22.7B (dividends received ¥15.9B, interest income ¥1.5B), non-operating expenses ¥5.0B (foreign exchange losses ¥3.6B, fees ¥0.8B) produced ordinary loss ¥11.6B. Special gains ¥182.5B (gain on sale of investment securities ¥170.4B, gain on sale of fixed assets ¥8.3B), special losses ¥1.9B (including impairment losses ¥28.9B) converted the result to profit before income taxes of ¥168.9B. After income taxes ¥29.3B (effective tax rate 17.3%), net income attributable to owners of parent was ¥137.8B (+15.2%). Net profit margin was 14.2% (from 13.1%, +1.1pt), but dependence on special gains corresponds to approximately 144% of the ¥125.3B net income. Conclusion: revenue up but operating-stage profit down, while special gains secured final-year profit growth.
The Pharmaceutical segment posted Revenue ¥779.5B (+3.5%) and an operating loss of ¥45.2B (from operating income ¥46.8B prior year, a -96.6% deterioration), margin -5.8%. Slight domestic pharmaceutical growth and export declines, along with higher SG&A and lower gross margin, pressured profitability. The Information Services segment had Revenue ¥172.2B (+51.2%), Operating Income ¥11.0B (+73.3%), margin 6.4%. An increase in profit of ¥6.4B year-on-year made this segment a support for consolidated profits. Construction & Facility Maintenance (Trading) posted Revenue ¥11.4B (+6.5%), Operating Income ¥1.4B (+37.4%), margin 12.0%—small but healthy. Future focus areas are structural profitability improvement in Pharmaceuticals and sustained growth in Information Services.
[Profitability] Operating margin -3.0% (from +6.5%, -9.5pt), net profit margin 14.2% (from +1.1pt) but driven by special gains, indicating significant deterioration in core profitability. ROE 5.4% (prior year 5.6%), ROA (on ordinary income basis) -0.4% (from +2.9%), showing decreased asset efficiency in core operations. Gross margin 47.0% (from 49.9%, -2.9pt), SG&A ratio 50.0% (from +6.7pt), highlighting worsening cost structure. [Cash Quality] Operating Cash Flow (OCF) was ¥-14.8B versus Net Income ¥125.3B, OCF/Net Income -0.12x, indicating issues in converting profits to cash. Free Cash Flow ¥160.2B was secured by Investing CF +¥175.0B (mainly proceeds from sale/redemption of securities). [Investment Efficiency] Total asset turnover 0.35x (Revenue ¥974.1B ÷ Total Assets ¥2,750.9B) remains low; investment securities ¥1,042.7B (37.9% of total assets) suppress asset efficiency. Capital expenditures ¥48.8B were 1.05x depreciation ¥46.4B, indicating maintenance-level investment. [Financial Soundness] Equity Ratio 84.2% (prior year 86.1%), D/E ratio 0.54% (interest-bearing debt ¥1.25B ÷ shareholders’ equity ¥2,315.4B) extremely conservative. Current ratio 530.1%, quick ratio 472.6%, cash & deposits ¥290.6B + short-term securities ¥253.7B, showing very strong liquidity.
OCF was ¥-14.8B (from +¥65.2B prior year, -122.8%) and only -0.12x relative to Net Income ¥125.3B. Pre-working-capital subtotal OCF was ¥-1.4B, with corporate tax payments -¥33.6B, inventories increase -¥5.4B, accounts payable increase +¥20.6B, etc. Investing CF was a large inflow of +¥175.0B (prior year +¥49.5B), driven by proceeds from sale/redemption of securities ¥219.9B, less capital expenditures -¥48.8B and acquisition of securities -¥19.9B. Free Cash Flow was ¥160.2B (OCF -¥14.8B + Investing CF +¥175.0B), ample. Financing CF was -¥102.5B, centered on dividend payments -¥48.4B, share buybacks -¥52.2B, lease repayments -¥1.7B. Cash and cash equivalents increased by ¥58.1B from opening ¥481.6B to closing ¥539.7B. The negative OCF is attributable to non-cash adjustment for gain on sale of investment securities (≈ -¥169.8B), tax payments, and deterioration in working capital efficiency, leaving clear issues in converting profits to cash.
The divergence between Ordinary Income ¥-11.6B and Net Income ¥125.3B is mainly due to Special Gains ¥182.5B, of which Gain on Sale of Investment Securities ¥170.4B accounts for the bulk of one-time income. Of non-operating income ¥22.7B, dividends received ¥15.9B represent stable income from the investment securities portfolio, but core recurring earning power is weak as indicated by the operating loss ¥29.3B. Comprehensive income ¥314.0B significantly exceeded Net Income ¥125.3B, aided by an increase in valuation differences on available-for-sale securities (OCI) of ¥153.5B. Deferred tax liabilities increased from ¥164.8B to ¥210.3B (+27.6%), suggesting expansion of unrealized gains. OCF ¥-14.8B is -0.12x of Net Income, with accruals (Net Income - OCF) at a high level of ¥+140.1B. Working capital: inventories ¥124.6B (prior year ¥137.1B), accounts receivable ¥306.7B (prior year ¥288.1B), accounts payable ¥66.6B (prior year ¥46.0B); increases in payables partially eased cash outflows, but receivables and inventory continue to tie up funds. The quality of earnings is highly dependent on one-time factors, and rebuilding the recurring earning base is urgent.
Full Year forecast: Revenue ¥957.0B (YoY -1.8%), Operating Income ¥44.0B, Ordinary Income ¥60.0B, Net Income ¥96.2B (EPS forecast ¥356.65). Compared with current period results (Revenue ¥974.1B, Operating loss ¥29.3B, Ordinary loss ¥-11.6B, Net Income ¥125.3B), revenue is slightly lower but operating-stage profitability is expected to recover. The ¥73.3B improvement in Operating Income (¥44.0B - (¥-29.3B)) assumes cost structure improvements and product mix correction in the Pharmaceutical segment. Ordinary Income ¥60.0B incorporates non-operating income (dividends/interest income around ¥17B). Net Income ¥96.2B (down ¥23.2% YoY) reflects the disappearance of special gains. Progress rate: Revenue at Q2 end is ¥974.1B / ¥957.0B = 101.8%; Operating Income -¥29.3B / ¥44.0B indicates shortfall, but full-year forecast assumes earnings improvement in H2. Dividend forecast ¥105.0 (including commemorative dividend ¥40) corresponds to a payout ratio of 29.4%, a cut from current period ¥160 but effectively maintained when excluding the commemorative dividend. Achieving guidance requires suppression of SG&A ratio in Pharmaceuticals and recovery of gross margin.
Annual dividend ¥160 (Q2-end ¥60, year-end ¥100, including commemorative dividend ¥40), total dividend amount ¥48.4B. Payout ratio is 48.3% (dividend ¥160 ÷ EPS ¥331.54), but on a regular dividend basis excluding the commemorative ¥40 (regular dividend ¥120) it is 36.3%. Share buybacks of ¥52.2B were executed, making total shareholder return ¥100.6B, representing a total return ratio of 80.3% against Net Income ¥125.3B. With Free Cash Flow ¥160.2B versus total returns ¥100.6B, FCF coverage is 1.59x, indicating ample room. Next fiscal year dividend forecast ¥105 (including commemorative ¥40) implies a regular dividend of ¥65, a substantial cut from current period regular dividend ¥120, but payout ratio versus forecast EPS ¥356.65 is 29.4%, a conservative level. Dividends of ¥48.4B against shareholders’ equity ¥2,301.5B imply DOE 2.1%. Treasury stock at year-end 5,090 thousand shares (10.9% of issued shares) is held, and share buybacks were conducted during the period. The shareholder return policy balances dividends and buybacks; financial capacity is very large, but next-year dividends reflect cautiousness tied to the recovery level of core earnings.
Risk of weak core earning power: Continued operating loss of ¥29.3B and operating margin -3.0% indicate persistent core deficits. The Pharmaceutical segment operating loss ¥45.2B (margin -5.8%) is the primary factor, with a rapid increase in SG&A ratio to 50.0% (from 43.3%, +6.7pt) and a decline in gross margin to 47.0% (from -2.9pt) representing structural issues. The ¥73.3B improvement required to reach next-year guidance Operating Income ¥44.0B presumes steep cost reductions or product mix shifts, posing execution risk. OCF ¥-14.8B and OCF/Net Income -0.12x also highlight poor cash conversion, necessitating rebuilding a sustainable growth base.
Risk from dependence on one-time gains and market fluctuations in investment securities: Gain on sale of investment securities ¥170.4B accounts for approximately 144% of Net Income ¥125.3B, indicating fragile recurring earnings. Investment securities balance ¥1,042.7B (37.9% of total assets), valuation differences on securities ¥540.8B, and deferred tax liabilities ¥210.3B (+27.6% YoY) point to high unrealized gain exposure; market deterioration could significantly impact the balance sheet and comprehensive income. Next-year net income forecast ¥96.2B incorporates the drop-off of special gains, but earnings volatility remains depending on portfolio strategy.
Working capital efficiency and business concentration risks: DSO 115 days, DIO 181 days, CCC 248 days indicate low working capital efficiency; accounts receivable ¥306.7B (+6.5%) and inventories ¥124.6B tie up funds and pressure OCF. Geographic concentration with over 90% domestic sales and business concentration with 80.0% in Pharmaceuticals make the company vulnerable to domestic drug price revisions, intensified competition, and changes in partnership contracts. This period recorded impairment losses ¥28.9B, evidencing risk of impairment to IP and partnership value. Rapid growth in Information Services (+51.2%) provides diversification benefits, but if pharmaceutical structural recovery lags, rebalancing the business portfolio becomes a more significant risk.
Profitability & Return
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | -3.0% | -94.2% (-358.4%–8.6%) | +91.2pt |
| Net Profit Margin | 12.9% | -101.5% (-373.7%–5.9%) | +114.4pt |
Both operating margin and net profit margin exceed the industry median by a wide margin, but operating-stage profitability is negative and ranks below median within the industry; the net profit margin advantage depends on one-time special gains.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 10.3% | -0.6% (-22.4%–13.3%) | +10.9pt |
Revenue growth rate exceeds the industry median by 10.9pt, placing the company among the upper group driven by rapid expansion in Information Services.
※ Source: Company aggregation
Feasibility of operating turnaround from current operating loss to profitability is the primary watch point. To improve the Pharmaceutical segment operating loss ¥45.2B to next-year guidance Operating Income ¥44.0B requires compression of SG&A ratio by 6.7pt and recovery of gross margin by 2.9pt. Monitor quarterly trends in gross margin, SG&A ratio, and Pharmaceutical segment profit to confirm structural improvement progress.
Strategic utilization of the investment securities portfolio and management of unrealized gains. This period realized ¥170.4B of sale gains to secure net profit; investment securities balance ¥1,042.7B and valuation differences ¥540.8B indicate substantial utilization potential. However, the increase in deferred tax liabilities to ¥210.3B highlights sensitivity of unrealized gains to the balance sheet; pay attention to the impact on comprehensive income and net assets in market volatility. Sustainability of dividends and buybacks depends on recovery of operating cash flow; improvement in FCF generation (OCF improvement and shortening of CCC) from next year onward will determine stability of shareholder returns.
Sustainability of Information Services growth and rebalancing of the business portfolio. With Revenue +51.2% and Operating Income +73.3%, Information Services reduces dependence on Pharmaceuticals. If this growth continues, the segment could exceed 20% of revenue within 2–3 years and contribute to stabilizing consolidated profit structure. Even if Pharmaceutical recovery is delayed, expanded contributions from Information Services and Construction & Facility Maintenance could support consolidated profits. However, resolving structural challenges in Pharmaceuticals (drug price revisions, competition, partnership dependence) is key to mid- to long-term valuation.
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 disclosures. Investment decisions are the responsibility of the investor; please consult a professional advisor as necessary before making investment decisions.