TAIKO PHARMACEUTICAL CO.,LTD. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥4.23B
• Operating Income: ¥324M
• Net Income: ¥714M
• EPS: ¥13.33

Income Statement

Balance Sheet

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

Daiko Pharmaceutical Co., Ltd. (4574) reported FY2025 Q3 consolidated results under JGAAP showing revenue of ¥4.229bn, down 7.6% YoY, indicating top-line headwinds likely from normalization of infection-control demand and/or channel inventory adjustments. Gross profit was ¥2.715bn, implying a robust gross margin of 64.2%, which underscores strong product economics and/or favorable mix despite the sales decline. Operating income was ¥324m, down 55.3% YoY, compressing the operating margin to 7.7% and highlighting elevated operating leverage and cost inefficiencies in the quarter. Ordinary income was ¥325m, broadly in line with operating income, suggesting limited net financial drag given modest interest expense of ¥6m. Net income was ¥669m (down 6.3% YoY), materially exceeding ordinary income, implying sizable non-operating/extraordinary gains and/or tax credits; income tax was negative ¥41m, further inflating bottom-line profitability. EPS was reported at 13.33, though share count data was not disclosed, limiting per-share analytics comparability. DuPont analysis indicates ROE of 8.12%, driven by a high net profit margin of 15.82%, asset turnover of 0.356x, and financial leverage of 1.44x; the ROE is supported more by below-operating-line items than by core operating performance. Liquidity appears strong with a current ratio of 306.9% and quick ratio of 291.0%, backed by working capital of ¥5.906bn, providing ample near-term financial flexibility. The interest coverage ratio is a solid 54x, consistent with minimal interest burden and conservative leverage. Inventories were ¥452m, roughly 24% of cost of sales, implying approximately 2.9 months of coverage and no immediate signs of overstock on the disclosed figures. The calculated debt-to-equity ratio is 0.60x, suggesting moderate leverage; however, the specific composition of interest-bearing debt is not disclosed. Several items are unreported in XBRL (e.g., depreciation and amortization, cash flow statements, equity ratio, EBITDA, DPS, share counts), limiting the depth of cash flow and capital allocation assessment; zeros should be interpreted as not disclosed, not actual zeros. There also appears to be a discrepancy between reported totals for assets, liabilities, and equity; this likely reflects reporting scope or mapping differences rather than a definitive inconsistency, so ratio-based insights are emphasized. Overall, core operations evidenced margin compression and high operating leverage against a declining revenue base, while headline net profitability benefited from non-operating/tax effects. The balance sheet liquidity is strong, solvency appears comfortable, and ROE is reasonable but quality-adjusted returns are weaker given the reliance on below-OP items. The outlook hinges on stabilizing revenue, restoring operating margin discipline, and confirming cash flow conversion as cash flow data becomes available.

Profitability Analysis

ROE_decomposition: ROE 8.12% = Net margin 15.82% × Asset turnover 0.356 × Financial leverage 1.44. The ROE is disproportionately supported by an elevated net margin driven by non-operating/extraordinary items and a negative tax line, rather than by core operating profitability. margin_quality: Gross margin is high at 64.2%, indicating strong product economics and/or favorable mix. Operating margin is 7.7% (¥324m/¥4,229m), down sharply YoY given -55.3% in operating income versus -7.6% in revenue, signaling cost rigidity and operating deleverage. Ordinary income margin is ~7.7% (¥325m/¥4,229m). Net margin of 15.82% (¥669m/¥4,229m) exceeds ordinary margin, pointing to one-off/non-operating uplift and a negative tax charge (income tax -¥41m). Interest burden is minimal with ¥6m expense and 54x coverage. operating_leverage: A -7.6% decline in revenue resulted in a -55.3% decline in operating income, evidencing high operating leverage and/or elevated SG&A intensity. This indicates significant sensitivity of operating profit to revenue fluctuations, likely tied to marketing/logistics costs and production overhead absorption.

Growth Assessment

revenue_sustainability: Revenue of ¥4.229bn declined 7.6% YoY, suggesting normalization post-pandemic for infection-control products and/or channel destocking. Sustainability hinges on stabilizing core demand, potential new product traction, and geographic/channel diversification. profit_quality: Core profit quality is mixed: strong gross margin but compressed operating margin. Net income quality is weaker given reliance on below-OP items and negative tax; ordinary income aligns more closely with recurring earnings power. outlook: Near-term recovery depends on cost control, mix improvement, and demand stabilization. With modest financial leverage and strong liquidity, the company has capacity to invest in marketing/innovation; however, reacceleration of revenue and restoration of operating margin are critical to improving quality-adjusted ROE.

Financial Health

liquidity: Current ratio 306.9% and quick ratio 291.0% indicate substantial short-term coverage; working capital of ¥5,906m supports operational resilience. solvency: Interest coverage at 54x and a reported debt-to-equity ratio of 0.60x suggest manageable leverage. Financial leverage from DuPont is 1.44x (Assets/Equity). Equity ratio was not effectively disclosed (reported 0.0% reflects non-disclosure). capital_structure: Total liabilities ¥4,949m versus total equity ¥8,236m indicate a conservative structure; the magnitude of interest-bearing debt is not specified. Given low interest expense (¥6m), debt service risk appears low.

Cash Flow Quality

earnings_quality: Cash flow data (OCF/FCF) is not disclosed, preventing direct assessment of cash conversion. Given net income exceeds ordinary income and taxes are negative, headline earnings likely overstate core cash-generating capacity for the period. FCF_analysis: Free cash flow is unreported. Without D&A, capex, and OCF detail, FCF durability cannot be evaluated. Monitoring future disclosures is essential. working_capital: Inventories of ¥452m equate to ~24.2% of COGS (¥1,864m), or roughly 2.9 months of coverage, which does not signal excess on current data. Receivables and payables details are not disclosed, limiting a full working capital cycle view.

Dividend Sustainability

payout_ratio_assessment: Annual DPS and payout ratio are reported as 0.00, which likely reflects non-disclosure rather than confirmation of no dividend; thus, payout cannot be assessed from this dataset. FCF_coverage: FCF is unreported, so dividend coverage by FCF cannot be evaluated. policy_outlook: Without historical DPS or stated policy, we cannot infer payout stability. Any future dividend capacity will depend on restoring operating margin and demonstrating consistent OCF.

Risk Assessment

Business Risks:

• Demand normalization and volatility for infection-control and consumer health products post-pandemic
• Price competition and promotional intensity in OTC/consumer channels
• Raw material and packaging cost inflation impacting gross-to-operating margin conversion
• Channel inventory swings and retailer buying patterns
• Product concentration risk in flagship disinfectant/air care brands
• Regulatory changes affecting claims/labeling in health and hygiene categories
• Brand erosion risk if efficacy/perception weakens

Financial Risks:

• Earnings reliance on non-operating/extraordinary items and tax effects in the period
• Limited visibility on cash generation due to unavailable cash flow statements
• Potential FX exposure if overseas sales or sourcing are material (not disclosed)
• Small-cap market liquidity and share price volatility

Key Concerns:

• Operating income contracted 55.3% on a 7.6% revenue decline, indicating high operating leverage
• Net income materially above operating/ordinary income, implying low recurrence quality
• Lack of OCF/FCF and D&A disclosure impedes assessment of earnings-to-cash conversion
• Need to confirm sustainability of negative tax and any extraordinary gains

Investment Implications

Key Takeaways:

• Revenue declined 7.6% YoY to ¥4.229bn amid demand normalization
• Gross margin is strong at 64.2%, but operating margin compressed to 7.7%
• Operating income fell 55.3% YoY, evidencing high operating leverage
• Net income of ¥669m (margin 15.8%) benefited from non-operating/tax effects
• ROE of 8.12% is acceptable but quality-adjusted returns are weaker
• Liquidity is strong (current ratio 307%, quick ratio 291%) and interest burden is low
• Cash flow and D&A data are not disclosed, limiting FCF assessment
• Inventory appears reasonable at ~2.9 months of COGS
• Debt metrics appear conservative; interest coverage is 54x

Metrics to Watch:

• Revenue trajectory by channel/brand and sell-out vs sell-in alignment
• Operating margin recovery and SG&A efficiency
• Ordinary income as a proxy for recurring earnings
• Disclosure of OCF, capex, and FCF; OCF/net income conversion
• Inventory turns and working capital swings
• Nature and recurrence of non-operating/extraordinary gains and tax items
• Equity ratio and interest-bearing debt disclosure

Relative Positioning: Within Japanese small/mid-cap consumer health and hygiene peers, Daiko shows superior gross margins but weaker operating margin resilience, resulting in mid-single-digit to high-single-digit ROE that may trail best-in-class peers; balance sheet liquidity is stronger than average, while earnings quality is less robust due to reliance on non-operating items this period.

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