| Metric | This Period | Prior Year, Same Period | YoY |
|---|---|---|---|
| Revenue | ¥403.2B | ¥330.7B | +21.9% |
| Operating Income | ¥5.5B | ¥-62.2B | +98.2% |
| Ordinary Income | ¥11.7B | ¥-70.5B | -57.1% |
| Net Income | ¥19.2B | ¥-44.5B | +143.2% |
| ROE | 4.1% | -9.3% | - |
FY2026 full-year results: Revenue ¥403.2B (vs prior year +¥72.5B, +21.9%), Operating Income ¥5.5B (vs prior year +¥67.7B; turned from a ¥-62.2B loss to profit), Ordinary Income ¥11.7B (vs prior year +¥82.2B; turned from a ¥-70.5B loss to profit), Net income attributable to owners of parent ¥19.2B (vs prior year +¥63.7B, +143.2%; turned from a ¥-44.5B loss to profit). Revenue achieved double-digit growth, operating stage returned to profit from loss, and bottom-line profit swung strongly positive aided by ¥20.9B of special gains.
[Revenue] Revenue was ¥403.2B, up +21.9% YoY. Cost of goods sold was ¥101.3B, resulting in gross profit ¥301.9B and a gross margin of 74.9%, an improvement of about 7.8pt from the prior year. Improvement in product mix or pricing factors is inferred to have driven both revenue growth and gross margin expansion. Segment information is not disaggregated because operations are a single segment (Pharmaceuticals Business), but simultaneous topline growth and margin improvement is notable.
[Profitability] SG&A was ¥296.3B, yielding an SG&A-to-revenue ratio of 73.5%—still high—and Operating Income remained ¥5.5B (Operating margin 1.4%). Although a large improvement from last year’s ¥-62.2B, core operating profitability remains limited. Non-operating income was ¥14.5B, including foreign exchange gains ¥7.1B and dividend/interest income, and after non-operating expenses ¥8.4B (including interest expense ¥4.0B), Ordinary Income was ¥11.7B. Special gains totaled ¥20.9B (including gain on sale of investment securities ¥2.1B, gain on forfeiture of share options ¥3.9B, gain on sale of subsidiary shares ¥1.5B, etc.), special losses ¥0.3B, resulting in profit before income taxes ¥32.2B and income taxes ¥10.2B, giving Net Income ¥19.2B. In conclusion, the company achieved revenue growth and turned to profitability, but special gains and FX gains materially boosted the bottom line.
[Profitability] Operating margin 1.4% improved significantly from -18.8% a year earlier but remains low in absolute terms; with gross margin 74.9% versus SG&A ratio 73.5%, core business margins are thin. ROE 4.1% is explained by DuPont decomposition as Net profit margin 4.8% × Total asset turnover 0.369 × Financial leverage 2.31x; the primary driver of improvement was recovery in net profit margin. However, operating-stage margin remains low at 1.4%, indicating high reliance on special gains and FX gains.
[Cash Quality] Operating Cash Flow (OCF) was ¥-1.4B, substantially below Net Income ¥19.2B (OCF/Net Income -0.07x); increases in accounts receivable +¥19.3B and inventories +¥18.5B were primary drivers, weakening cash conversion. EBITDA ¥31.1B (Operating Income ¥5.5B + Depreciation ¥25.6B) to OCF conversion ratio was -0.04x, extremely low, highlighting notable working capital expansion.
[Investment Efficiency] Total asset turnover 0.369x; Construction in progress ¥194.1B (17.8% of total assets) is suppressing asset efficiency. Capital expenditures ¥114.3B are 4.47x depreciation ¥25.6B, reflecting growth investment emphasis, while accumulation of pre-operating assets is dragging down asset turnover.
[Financial Soundness] Equity ratio 43.4%, current ratio 116.5% provide minimum coverage, but short-term borrowings ¥380.9B constitute the core of current liabilities; compared to Cash and deposits ¥140.1B, cash/short-term borrowings is 0.37x, indicating a thin liquidity cushion. Interest-bearing debt ¥502.9B (short-term borrowings ¥380.9B + long-term borrowings ¥122.0B) yields Debt/EBITDA 16.2x and interest coverage 1.39x (EBITDA ¥31.1B / interest payments 4.0B + actual paid 4.1B), indicating fragile financial flexibility.
OCF was ¥-1.4B, with a subtotal of ¥-6.0B driven by increases in working capital (accounts receivable -¥19.3B, inventories -¥18.5B, accounts payable -¥0.7B), and corporate tax payments ¥7.6B were deducted. The divergence from Net Income ¥19.2B stems from working capital expansion; the CCC, based on Days Sales Outstanding 128 days, Days Inventory Outstanding 866 days, and Days Payable Outstanding 46 days, is approximately 948 days by simple calculation—extremely prolonged. Investing Cash Flow was ¥-125.0B, almost entirely due to capital expenditures ¥-114.3B, partially offset by proceeds from sale of investment securities ¥16.7B and proceeds from sale of subsidiary shares ¥1.5B. Free Cash Flow was ¥-126.4B, a large negative, with aggressive capex and working capital increases pressuring liquidity. Financing Cash Flow was ¥+133.1B, mainly from net increase in short-term borrowings ¥150.9B and long-term borrowings procured ¥37.5B, which covered long-term borrowings repayments ¥-30.5B, dividend payments ¥-24.4B, and share buybacks ¥-25.3B. Ending Cash and deposits were ¥140.1B, a small increase of ¥8.1B YoY, showing dependence on short-term borrowings to fund capex and working capital.
Of Ordinary Income ¥11.7B, Operating Income accounted for ¥5.5B and the remaining ¥6.2B was contributed by non-operating items (net +¥6.2B). Non-operating income ¥14.5B consisted of foreign exchange gains ¥7.1B, dividend income received ¥0.4B, interest income received ¥0.8B, and other ¥1.6B; FX gains represent roughly 49% of non-operating income. Non-operating expenses totaled ¥8.4B (interest expense ¥4.0B, foreign exchange losses ¥2.0B, other ¥2.4B), leaving a net positive FX-related result of ¥5.1B. Special gains ¥20.9B (gain on sale of investment securities ¥2.1B, gain on forfeiture of share options ¥3.9B, gain on sale of subsidiary shares ¥1.5B, etc.) are all one-time factors. The gap between Ordinary Income and Net Income is due to special items and taxes; together with negative OCF, the cash backing for Net Income ¥19.2B is weak, and earnings quality depends on one-off items and FX fluctuations.
Full-year guidance: Revenue ¥457.0B (vs prior year +13.3%), Operating Income ¥11.0B (vs prior year +98.2%), Ordinary Income ¥5.0B (vs prior year -57.1%), Net income attributable to owners of parent ¥2.0B, EPS forecast 1.64円, dividend forecast 10円. Progress against guidance: Revenue 88% (¥403.2B/¥457.0B), Operating Income 50% (¥5.5B/¥11.0B), Ordinary Income 233% (¥11.7B/¥5.0B), Net income attributable to owners of parent 960% (¥19.2B/¥2.0B). Operating Income is behind plan, indicating challenges in absorbing SG&A and improving working capital efficiency, while Ordinary Income and Net Income have significantly exceeded guidance due to FX gains and special gains. The dispersion in progress versus guidance suggests outperformance from non-recurring items and delayed ramp-up of core operations.
Dividends were Year-end ¥10 and Interim ¥10, total ¥20, yielding a payout ratio of 111.9% against EPS ¥17.87, exceeding net income. With OCF ¥-1.4B and Free Cash Flow ¥-126.4B, dividend payments ¥24.4B were funded by borrowings, making FCF coverage unmeasurable (negative). Share buybacks of ¥25.3B were executed, and total returns including dividends amounted to ¥49.7B, giving a Total Return Ratio of 262%. The full-year guidance plans a dividend cut to ¥10, indicating a priority on conserving cash and reducing leverage. Current dividends lack sustainability absent OCF improvement and completion of investment cycle.
Working capital risk: DSO 128 days and DIO 866 days are prolonged, with working capital up ¥37.8B YoY. Inventory buildup may indicate demand forecast errors or shortfall in sales plans; slowed receivables turnover may reflect collection risk or deteriorating trade terms. Without normalization of working capital, continued negative OCF and increased dependence on short-term borrowings are likely.
Construction-in-progress risk: Construction in progress ¥194.1B (17.8% of total assets) accumulated as non-operating assets; any delays or plan changes in commissioning would defer depreciation start and revenue contribution, sustaining higher leverage and interest burdens. Given capex ¥114.3B and negative OCF, dependency on external financing is increasing.
Liquidity and refinancing risk: Short-term borrowings ¥380.9B account for 79.1% of current liabilities, and Cash and deposits ¥140.1B cover only about 37% of that. With Debt/EBITDA 16.2x and interest coverage 1.39x under high leverage, interest rate rises or tightening credit conditions could raise refinancing costs and create liquidity strain. FX gain/loss volatility also increases non-operating income volatility.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 1.4% | -94.2% (-358.4%–8.6%) | +95.6pt |
| Net Profit Margin | 4.8% | -101.5% (-373.7%–5.9%) | Delta |
Both operating margin and net profit margin exceed the industry median substantially, but this is driven by the median being deeply negative; the company’s absolute operating margin 1.4% remains low.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 21.9% | -0.6% (-22.4%–13.3%) | +22.5pt |
Revenue growth outperforms the industry median, placing the company relatively favorable within the sector.
※ Source: Company compilation
The company turned to profit and achieved gross margin improvement, but Operating Margin 1.4% remains low and core business profitability is limited. Special gains ¥20.9B and FX gains ¥7.1B strongly boosted Net Income, highlighting the need to strengthen recurring earnings. If Construction in progress ¥194.1B is commissioned and SG&A absorption is achieved, there is significant upside to operating margin.
OCF ¥-1.4B and Free Cash Flow ¥-126.4B reflect aggressive capex and working capital expansion (accounts receivable +¥19.3B, inventories +¥18.5B). High dependence on short-term borrowings ¥380.9B and cash/short-term borrowings 0.37x indicate a thin liquidity cushion. Monitoring focus will be normalization of inventories and receivables and commissioning of construction in progress to restore cash generation.
Dividend payout ratio 111.9% and Total Return Ratio 262% reflect shareholder returns lacking cash backing; the full-year guidance plans a dividend cut to ¥10. Until OCF turns positive and Debt/EBITDA falls, a conservative dividend policy and deleveraging should be prioritized.
This report was automatically generated by AI analyzing 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 from public financial statements. Investment decisions are your own responsibility; consult a professional advisor as necessary.