KISSEI PHARMACEUTICAL CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥45.83B
• Operating Income: ¥-6.84B
• Net Income: ¥5.25B
• EPS: ¥186.81

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

Kissei Pharmaceutical (TSE:4547) posted FY2026 Q2 consolidated results under JGAAP with resilient top-line growth but weak core profitability and a net profit driven by non-operating/extraordinary items. Revenue rose 7.9% YoY to ¥45.8bn, supported by a strong gross margin of 46.7% (gross profit ¥21.4bn). Despite healthy gross profitability, operating income was a loss of ¥6.8bn (YoY change -11.6%), indicating elevated SG&A/R&D intensity and negative operating leverage in the half. Ordinary income was also negative at ¥5.6bn, underscoring that core operations and financial/other recurring items were not sufficient to offset expenses. Nonetheless, net income came in at a positive ¥7.8bn (+48.3% YoY), implying sizable extraordinary gains and/or non-recurring income items that more than offset the operating/ordinary losses. EBITDA was negative at ¥4.6bn, consistent with the operating loss after adding back ¥2.3bn of depreciation and amortization. Operating cash flow of ¥2.8bn was materially below net income (OCF/NI 0.36x), signaling low earnings quality this period as cash generation did not keep pace with reported profits. Liquidity appears very strong with a current ratio of 6.45x and quick ratio of 5.63x, supported by substantial working capital of ¥90.4bn. Leverage remains modest; the DuPont leverage factor is 1.23x and interest expense is minimal at ¥9m, keeping financial risk low despite the operating loss. On DuPont metrics, ROE is calculated at 3.66% based on a relatively high net margin (16.98%) driven by non-recurring items, low asset turnover (0.176x), and conservative leverage (1.23x). The divergence between negative operating/ordinary income and positive net income suggests significant one-offs; sustainability of earnings will depend on normalizing the operating base. Reported cost of sales and gross profit figures do not reconcile arithmetically, but the gross margin provided (46.7%) is internally consistent with the gross profit value; analysis relies on the given gross margin. Several balance sheet and cash items are unreported in the XBRL (e.g., equity ratio, cash & equivalents, investing cash flow, DPS, share counts), which limits precision on capital structure and capital allocation analysis; zeros for these items should be interpreted as undisclosed rather than actual zero. Financing cash outflow of ¥2.0bn suggests cash returned to stakeholders and/or debt service, but the DPS figure is not disclosed, so dividend-related conclusions are tentative. Overall, the company shows solid revenue momentum and liquidity, but weak underlying profitability and low cash conversion; near-term results hinge on controlling SG&A/R&D spend and the absence of one-off gains.

Profitability Analysis

roe_decomposition: ROE (DuPont) = Net Profit Margin (16.98%) × Asset Turnover (0.176x) × Financial Leverage (1.23x) = 3.66%. The ROE is modest and largely supported by a high reported net margin that reflects non-recurring gains, rather than core operating strength. margin_quality: Gross margin is 46.7%, indicating healthy product economics. However, the operating margin is deeply negative (Operating income -¥6.84bn), implying significant SG&A/R&D pressure. Ordinary income is also negative, corroborating weak recurring profitability. The positive net margin is not indicative of core margin strength and likely reflects extraordinary income. operating_leverage: Revenue grew 7.9% YoY while operating income remained negative and reportedly deteriorated YoY, indicating adverse operating leverage. Fixed cost absorption appears insufficient in the half; controlling SG&A (notably R&D typical for pharma) will be key to restoring operating profitability.

Growth Assessment

revenue_sustainability: Top-line grew 7.9% YoY to ¥45.83bn, which is solid for a mature pharma. Sustainability will depend on product mix (patent-protected brands vs. generics), price revisions, and volumes. No segment detail was disclosed here, so we treat the growth as broadly supported but unverified by mix. profit_quality: Core profit quality is weak: operating loss (¥6.84bn) and ordinary loss (¥5.62bn) contrast with positive net income (¥7.78bn). The gap implies reliance on non-recurring gains; absent similar items, earnings could revert toward operating losses. outlook: Near-term outlook hinges on (1) cost discipline to mitigate negative operating leverage, (2) stabilization of R&D and promotional spend, and (3) absence of material one-off tailwinds. Restoring positive operating income is the pivotal milestone for sustainable growth.

Financial Health

liquidity: Current assets ¥106.98bn vs current liabilities ¥16.58bn yields a current ratio of 6.45x and quick ratio of 5.63x; working capital stands at ¥90.40bn. Liquidity appears ample even without disclosed cash figures. solvency: Total assets ¥261.13bn; total equity ¥212.63bn. DuPont leverage (assets/equity) is 1.23x, indicating low leverage. Interest expense is minimal (¥9m), and interest coverage is negative due to negative EBIT, but absolute interest burden is de minimis. capital_structure: Debt-to-equity is reported at 0.16x (likely interest-bearing debt basis). The reported equity ratio is undisclosed (0% placeholder). While liabilities reported (¥33.93bn) appear low against assets, some components may be undisclosed; nonetheless, balance sheet conservatism is implied by leverage metrics.

Cash Flow Quality

earnings_quality: OCF of ¥2.78bn vs net income ¥7.78bn yields OCF/NI of 0.36x, indicating low cash realization of earnings this period and reinforcing the non-recurring nature of reported profit. fcf_analysis: Free cash flow is undisclosed here (0 placeholder). With OCF positive and investing CF undisclosed, we cannot compute FCF precisely. Given negative EBITDA and operating loss, underlying FCF generation is likely constrained absent asset sales or working capital releases. working_capital: Working capital is ample (¥90.40bn). OCF positivity despite an operating loss suggests working capital inflows (e.g., collections or inventory drawdown), but detailed drivers (AR/AP/inventory changes) are not disclosed.

Dividend Sustainability

payout_ratio_assessment: Annual DPS and payout ratio are undisclosed (0 placeholders). With positive net income but negative operating/ordinary results, a traditional earnings-based payout assessment would be misleading. fcf_coverage: FCF coverage is undisclosed. Financing cash outflow of ¥1.96bn may reflect dividends and/or other financing activities, but we cannot attribute precisely without DPS or share count. policy_outlook: Given strong liquidity and low leverage, the balance sheet could support distributions; however, sustainability should be judged against normalized operating cash flow rather than this period’s one-offs. Absent disclosure, we cannot infer changes to dividend policy.

Risk Assessment

Business Risks:

• Product concentration and patent cliff risk typical of branded pharma
• Drug price revisions and NHI reimbursement pressures in Japan
• R&D execution risk and clinical/regulatory setbacks
• Competition from generics and biosimilars
• Supply chain and manufacturing quality risks
• FX exposure on imported APIs and ex-Japan revenues (if any)

Financial Risks:

• Negative operating and ordinary income indicate execution risk in restoring core profitability
• Weak cash conversion (OCF/NI 0.36x) increases reliance on working capital and non-recurring gains
• Potential earnings volatility from extraordinary items
• Limited transparency on cash, investing cash flows, and detailed debt composition due to undisclosed items

Key Concerns:

• Sustainability of net profit given reliance on non-recurring gains
• Adverse operating leverage despite revenue growth
• Visibility on capital allocation (dividends/buybacks) given undisclosed DPS and share data
• Reconciling reported line items (e.g., cost of sales vs gross profit) amid partial disclosures

Investment Implications

Key Takeaways:

• Top-line growth (+7.9% YoY) with strong reported gross margin (46.7%)
• Core profitability weak: operating loss of ¥6.84bn and ordinary loss of ¥5.62bn
• Net profit (¥7.78bn) appears driven by non-recurring items; low cash conversion (OCF/NI 0.36x)
• Balance sheet conservative with low leverage (assets/equity 1.23x) and strong liquidity (current ratio 6.45x)
• Several critical disclosures are missing (cash, investing CF, DPS, shares), constraining precision on valuation and capital returns

Metrics to Watch:

• Operating income trajectory and EBITDA recovery over the next two quarters
• SG&A and R&D intensity as a percent of sales
• Operating cash flow and FCF (including CapEx and investing CF once disclosed)
• Extraordinary gains/losses and their recurrence
• Inventory and receivables trends relative to sales (working capital discipline)
• Pipeline/regulatory milestones that could affect medium-term revenue mix

Relative Positioning: Within Japan mid-cap pharma, Kissei exhibits a conservative balance sheet and solid gross margins but currently trails peers on core profitability and cash conversion, with reported ROE supported by one-off items rather than recurring operations.

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