| Indicator | This Period | Prior Year | YoY |
|---|---|---|---|
| Revenue | ¥711.3B | ¥641.4B | +10.9% |
| Operating Income | ¥58.3B | ¥53.3B | +9.4% |
| Ordinary Income | ¥56.6B | ¥51.1B | +10.9% |
| Net Income | ¥56.2B | ¥51.0B | +10.3% |
| ROE | 7.4% | 7.1% | - |
The fiscal year ended March 2026 delivered Revenue of 711.3B (YoY +69.9B +10.9%), Operating Income of 58.3B (YoY +5.0B +9.4%), Ordinary Income of 56.6B (YoY +5.6B +10.9%), and Net Income attributable to owners of the parent of 54.2B (YoY +3.2B +6.3%), achieving both revenue and profit growth. The pharmaceutical business (82.8% of sales) grew +4.0% YoY, and newly consolidated overseas operations contributed 46.4B, supporting top-line expansion. On the operating side, a gross margin of 48.0% was maintained and EBITDA reached 87.5B (margin 12.3%), indicating a solid earnings base; however, the operating profit margin slightly compressed to 8.2% (down 0.1pt from 8.3% prior year). Extraordinary gains included 14.7B from sale of investment securities, which lifted pre-tax profit, while the forecast for next fiscal year (Revenue 730.0B +2.6%, Operating Income 62.0B +6.3%, Net Income 48.0B) plans for lower net profit versus this year, reflecting conservative assumptions that strip out one-off items. Operating Cash Flow (OCF) improved materially to 63.0B (YoY +153.6%), but heavy working capital (CCC 318 days) constrained cash conversion and Free Cash Flow (FCF) remained at 5.5B. Financial health is very strong with current ratio 275.6%, Debt/EBITDA 1.13x, and interest coverage 26.3x, and the payout ratio of 30.6% (annual ¥60/ share) is at a sustainable level; however, FCF coverage is low at 0.09x, making working capital efficiency improvement a focus for the coming year.
[Revenue] Revenue reached 711.3B (YoY +10.9%), achieving double-digit growth. The core Pharmaceutical Business recorded 589.3B (+4.0%), accounting for 82.8% of total sales, with sales to Takeda Pharmaceutical driving stable growth at 571.6B. Animal Health posted 73.3B (+1.2%) showing slight increase, and Overseas Business realized 46.4B reflecting full contribution from newly consolidated entities (no sales in the prior year due to the start of consolidation in Vietnam), indicating diversification of the sales mix. Domestic sales accounted for over 90% regionally. Cost of sales totaled 369.8B (cost ratio 52.0%), roughly unchanged from the prior year, so gross-stage profitability is stable.
[Profitability] Operating Income was 58.3B (+9.4%), but the operating margin narrowed slightly to 8.2% from 8.3% a year earlier. Selling, General & Administrative expenses (SG&A) were 283.1B (SG&A ratio 39.8%), up +8.9% YoY and below the sales growth rate, so modest operating leverage was realized. However, amortization of goodwill of 1.7B and increased corporate-level administrative costs (corporate allocation -17.3B vs -13.2B prior year) pressured margins. Non-operating items resulted in a net loss of -1.7B: dividend income 3.4B and interest income 0.5B offset by FX losses 1.6B, interest expense 2.2B, and equity-method investment losses 2.9B. Extraordinary items recorded special gains of 15.7B including 14.7B of investment securities sale gains, outweighing special losses of 2.4B (investment securities valuation loss 2.4B and impairment loss 3.0B included), thereby boosting pre-tax income. As a result, profit before tax was 69.9B (YoY +12.9%), and after total corporate taxes of 13.7B (effective tax rate 19.5%) and non-controlling interests of 2.0B, Net Income attributable to owners of the parent was 56.2B (+10.3%). Ordinary Income of 56.6B and Net Income of 56.2B are almost identical; the divergence from pre-tax profit is mainly due to one-off items such as investment securities sale gains. In conclusion, revenue and operating profit growth were driven by the pharmaceutical business, maintenance of gross margin and containment of SG&A growth, but increases in non-operating costs and expanded non-operating losses limited growth at the ordinary-income stage; final profit was uplifted by special gains.
The Pharmaceutical Business reported Revenue 589.3B (+4.0%), Operating Income 71.2B (+12.2%), and operating margin 12.1% (improved 0.9pt from 11.2% prior year), leading revenue and profit growth as the core segment. Stable sales to Takeda and improved SG&A efficiency drove margin improvement. Animal Health posted Revenue 73.3B (+1.2%), Operating Income 3.4B (+14.7%), and operating margin 4.7% (up 0.6pt from 4.1%), where modest revenue growth and margin improvement contributed. Overseas Business delivered Revenue 46.4B (no sales in prior year at consolidation start), Operating Income 1.1B, and operating margin 2.3%, achieving a return to profitability though margins remain low in ramp-up. The prior-year overseas impairment loss of 124.8B (disclosed as subsidiary-related P/L) did not recur this year; only goodwill amortization of 1.7B was borne. Other segments recorded Revenue 3.1B (-5.8%) and an operating loss of 0.1B, remaining small and loss-making. After deducting corporate expenses of -17.3B, consolidated Operating Income was 58.3B versus aggregate segment profits of 75.6B, indicating corporate allocation depressed consolidated margin. Operating assets of the Pharmaceutical Business were 490.9B, representing 70% of total, with return on invested operating assets at 14.5% (Operating Income 71.2B ÷ assets 490.9B). Overseas assets totaled 169.8B, 15.2% of consolidated assets, and future improvement in overseas margins will be key to lifting consolidated ROA.
[Profitability] Operating margin 8.2%, Net margin 7.9%, ROE 7.4%, Return on Total Assets (Ordinary Income/Total Assets) 5.1%. Gross margin remains high at 48.0%, and EBITDA margin is 12.3% (EBITDA 87.5B), indicating good cash generation from core operations, but SG&A ratio at 39.8% is elevated and compresses operating-stage margins. ROE declined 1.1pt from 8.5% prior year, influenced by a slight fall in Net margin (from 7.95% to 7.9%) and stagnation in total asset turnover (0.635x, prior year 0.615x, roughly flat). [Cash Quality] OCF/Net Income is 1.12x, so cash backing of profits is acceptable, but OCF/EBITDA is 0.72x, well below 1.0x, indicating weak cash conversion. Deterioration in working capital (Receivables DIO 82 days, Inventory DIO 146 days, CCC 318 days) is the main factor; inventories are 147.4B (prior year 150.4B, roughly flat but inventory days increased), receivables 160.2B (up 5.5% from 151.8B), showing working capital compression has not kept pace with sales growth. [Investment Efficiency] Total asset turnover 0.635x (annualized 1.27x), multiplied by EBIT margin 8.2%, yields ROA of 5.2%, indicating mid-level asset efficiency. Goodwill/EBITDA 0.27x and intangible assets/total assets 7.9% reflect balance sheet flexibility and restrained M&A burden. Construction in progress is high at 60.8B (31.6% of tangible fixed assets), indicating significant in-progress CAPEX awaiting commencement; future depreciation increases and revenue contribution will be notable. [Financial Soundness] Current ratio 275.6%, quick ratio 209.4%, Equity Ratio 68.3%, Debt/EBITDA 1.13x, interest coverage 26.3x — all very healthy. Cash and deposits are 101.3B versus short-term borrowings of 17.1B, cash/short-term liabilities ratio 5.93x, indicating low rollover risk. Total interest-bearing debt is 99.1B (short-term 15.6B + long-term 81.7B + bonds etc. 1.7B) with a long-term ratio of 82.5%, implying stable funding. Investment securities 172.99B (15.4% of total assets) were increased aggressively (+36.6% YoY), making valuation gains/losses on these risk assets a potential P&L impact.
OCF was 63.0B (prior year 24.8B, +153.6%) — a large increase, representing 112% of Net Income 56.2B, providing good cash backing of profits. Profit before tax 69.9B plus depreciation 29.2B and goodwill amortization 1.7B produced non-cash charges totaling 30.9B, bringing the subtotal (before working capital changes) to 101.0B. However, large working capital increases (inventory increase -26.8B, trade receivables increase -8.7B, trade payables decrease -15.4B) caused approximately -50.9B of cash outflow, pressuring OCF. Corporate tax payments of 5.9B were down -35.6B YoY (prior year included a large tax payment), contributing materially to the OCF increase this period. Net financial cash inflow from interest and dividends received 3.9B less interest paid -2.2B resulted in +1.7B. Investing Cash Flow was -57.5B (prior year -61.2B): CAPEX -25.5B (down from -29.6B prior year), intangible asset acquisitions -3.3B, acquisition of investment securities -39.1B (no comparable prior-year figure), partially offset by proceeds from sale of investment securities 20.7B. Active trading of investment securities corresponds with the recording of 14.7B special gains. Financing Cash Flow was -8.2B (prior year -29.6B): proceeds from long-term borrowings 35.0B were offset by repayments of long-term borrowings -19.4B, net decrease in short-term borrowings -7.4B, and dividend payments -16.2B, resulting in a small net cash outflow. Free Cash Flow was 5.5B (although a simple calculation OCF 63.0B - CAPEX 25.5B - intangible expenditures 3.3B would suggest ~34B, the disclosed total FCF is 5.5B after net effects of investment securities trading), indicating limited financial flexibility once securities trading is netted. Dividend payments of 16.2B were not fully covered by FCF. Cash and cash equivalents decreased from 106.0B at the start of the period to 101.3B at the end, a decline of 4.8B; liquidity remains high but dividend dependence on non-FCF sources suggests reliance on cash on hand and balance sheet capacity. Without improvement in working capital efficiency, sustainable FCF generation and concurrent shareholder returns may be difficult.
Ordinary Income 56.6B and Net Income 56.2B are nearly identical, indicating ordinary-stage earnings form the basis of final profit. However, the gap to pre-tax profit 69.9B is attributable to special gains of 15.7B, primarily 14.7B from sale of investment securities — a one-off factor. Excluding this, baseline net profit is estimated around 43–45B. Non-operating revenues of dividend income 3.4B and interest income 0.5B were outweighed by FX losses 1.6B, interest expense 2.2B, and equity-method losses 2.9B, producing net non-operating loss of -1.7B. FX losses and equity-method investment losses are highly non-recurring and may vary with external conditions. Special losses were small at 2.4B (impairment loss 3.0B, investment securities valuation loss 2.4B totaling 2.4B — as disclosed), and impairment expense of 3.0B was also recorded in the prior year, likely sporadic costs related to business restructuring or asset disposals. Comprehensive income was 62.1B (5.9B above Net Income 56.2B); other comprehensive income breakdown: investment securities valuation +7.9B and actuarial gains on retirement benefits +3.0B were positive, while translation adjustments -4.5B and share of OCI of equity-method affiliates -0.5B were negative. Investment securities valuation gains +7.9B accumulated in OCI represent potential P&L recycling when realized. OCF/EBITDA ratio of 0.72x indicates slow cash accrual relative to profit, so earnings quality requires attention. Next fiscal year Net Income forecast of 48.0B (vs this period 56.2B, -14.6%) is consistent with a conservative normalization scenario removing this period’s 14.7B special gains and normalization of non-operating items; the underlying ordinary-income earning power is judged stable.
Full-year guidance forecasts Revenue 730.0B (+2.6% YoY), Operating Income 62.0B (+6.3%), Ordinary Income 61.0B (+7.7%), and Net Income attributable to owners of the parent 48.0B (vs this period 56.2B, -14.6%). Compared with this period’s results, revenue growth decelerates and operating profit edges up modestly, while net profit is planned lower, consistent with normalization after this period’s special gains of 15.7B (primarily 14.7B investment securities sale gains). Progress rates versus guidance are Revenue 97.4%, Operating Income 94.0%, Ordinary Income 92.8%, and Net Income 117.1% (this period exceeded guidance on net profit). Considering the special gain contribution this period, core operational earnings are progressing in line with guidance on a full-year basis. Dividend guidance is annual ¥32/share (a large reduction from this period’s ¥60/share), implying a payout ratio around 33% based on forecast Net Income 48.0B (equivalent to total dividends ~¥91B — note this arithmetic reflects text commentary). However, a note states that on May 11 a disclosure concerning dividend increase and change to dividend policy was published, suggesting the possibility that year-end dividend could be raised and the full-year ¥60/share maintained (the note references "Notice concerning distribution of surplus (dividend increase) and change in dividend policy"). The forward-looking cautionary note indicates actual results may differ if assumptions change, and further details will be disclosed at the earnings presentation scheduled for May 20. Key to achieving forecasts and maintaining dividends will be stable underlying ordinary earnings excluding special gains, recovery of cash generation via working capital improvements, and margin improvement in overseas operations.
Actual dividends this period comprised interim dividend ¥27/share and year-end dividend ¥33/share, totaling ¥60/share — a substantial increase from prior-year dividend ¥25/share (+140%). The year-end dividend was increased from the initial expectation (announced on May 11), suggesting a change in dividend policy. The payout ratio was 30.6% (dividends total approx. 17B against Net Income 56.2B), sustainable on a profit basis, but dividends paid 16.2B were not covered by FCF of 5.5B, giving FCF-based dividend coverage of 0.34x — low. This period’s dividend was funded by a combination of OCF, proceeds from asset sales, and cash on hand/balance sheet capacity. Next fiscal year dividend guidance is ¥32/share (a significant cut from ¥60/share), but the note on potential dividend increase and policy change implies the ¥60/share level could be maintained. Based on forecast Net Income 48.0B, a payout ratio around 33% implies dividend payments roughly 16B, indicating a managed payout ratio range of 30–35%. With Debt/EBITDA 1.13x, cash balance 101.3B, and Equity Ratio 68.3%, the balance sheet cushion is strong and there is no short-term concern over dividend payment ability; however, without recovery in FCF (via working capital efficiency), balancing dividends and growth investment will be difficult. There has been no share buyback activity; total return ratio equals the payout ratio at 30.6%. The shareholder return policy is dividend-centric, aiming for stable long-term dividend growth assuming profit growth and improved cash generation.
Risk of declining cash conversion due to enlarged working capital: CCC 318 days and Inventory DIO 146 days indicate material inventory and receivable accumulation, and OCF/EBITDA 0.72x is well below industry norms (0.9x+). Working capital increases caused roughly -50.9B of annual cash outflow, compressing FCF to 5.5B. While the pharmaceutical business structurally requires long manufacturing lead times and inventory holdings, failure to compress working capital relative to sales growth could impair funding for dividends and growth investment, increase reliance on additional borrowings, and undermine sustainability of shareholder returns.
Revenue volatility risk from major customer concentration: Of the Pharmaceutical Business sales 589.3B, sales to Takeda amount to 571.6B, representing an extremely high concentration of 97%. Changes in contract terms for contract manufacturing or licensing, drug price revisions, or Takeda’s production strategy adjustments could cause large swings in revenue. Although the segment’s operating margin is relatively high at 12.1%, margin pressure could occur depending on transaction terms with the major customer. Current stability is observed, but renewal risk or weakening pricing leverage could materially affect future profitability.
Low profitability and impairment risk in overseas operations: Overseas Business generated revenue 46.4B and Operating Income 1.1B for a margin of 2.3%, very low, and had recorded impairment losses of 124.8B in the prior year. Low profitability in the ramp-up phase is expected, but failure to expand local sales or improve margins as planned could necessitate additional impairments or consideration of exit. Goodwill balance is 23.5B (small at 0.27x EBITDA) which mitigates impairment risk, but deterioration in recoverability of intangible assets and goodwill within overseas operating assets of 169.8B (15.2% of total assets) could still materially affect the balance sheet. FX volatility (FX loss 1.6B recorded) and changes in local regulations are additional risks.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 8.2% | -94.2% (-358.4%–8.6%) | +102.4pt |
| Net Margin | 7.9% | -101.5% (-373.7%–5.9%) | +109.4pt |
Operating margin 8.2% and Net margin 7.9% substantially exceed industry medians, placing the company in the upper tier on profitability.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 10.9% | -0.6% (-22.4%–13.3%) | +11.5pt |
Revenue growth of +10.9% substantially exceeds the industry median of -0.6%, indicating above-average growth performance.
※ Source: Company compilation
Distinguish operating robustness from one-off special gains: Revenue +10.9%, Operating Income +9.4%, gross margin 48.0%, EBITDA margin 12.3% indicate stable core earnings, and the Pharmaceutical Business operating margin of 12.1% (up 0.9pt from 11.2%) supports the earnings base. However, of Net Income 56.2B, 14.7B from sale of investment securities inflated pre-tax profit; excluding this, baseline net profit is estimated at 43–45B. Next fiscal year Net Income guidance 48.0B (YoY -14.6%) reflects normalization after special gains, and ordinary-stage earnings are expected to be slightly increasing rather than declining. Industry benchmarks place the company high on operating and net margins, preserving relative profitability advantage.
Monitor low cash conversion and dividend sustainability: OCF/EBITDA 0.72x, CCC 318 days, and FCF 5.5B show cash generation lags profit growth materially. Dividend payments 16.2B were supplemented by proceeds from sale of investment securities 20.7B and cash on hand. The payout ratio of 30.6% is sustainable on a profit basis, but without working capital improvements (inventory compression, faster receivable collections) sustaining dividends on an FCF basis alongside growth investment will be challenging. With Debt/EBITDA 1.13x and cash balance 101.3B, the balance sheet cushion is ample for the short term, but correction of CCC will be a key medium-term evaluation metric.
Monitor overseas margin improvement and major-customer concentration: Overseas Business revenue 46.4B with operating margin 2.3% remains low, and prior impairment of 124.8B necessitates careful monitoring of recoverability. Expansion of local sales and margin improvement will be critical for lifting segment ROA. Conversely, 97% concentration of pharmaceutical sales to Takeda indicates top-line vulnerability to contract or pricing changes. The balance between stability in the core business and growth in overseas operations will determine medium-to-long-term improvement in the earnings structure.
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 firm based on publicly available financial statements. Investment decisions are your own responsibility; consult a professional advisor as needed.
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