ASKA Pharmaceutical Holdings Co.,Ltd. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥35.25B
• Operating Income: ¥2.65B
• Net Income: ¥1.27B
• EPS: ¥78.49

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

Asuka Pharmaceutical Holdings (TSE: 48860) delivered FY2026 Q2 consolidated results with topline growth but margin compression at the operating and net levels. Revenue rose 8.9% YoY to ¥35.253bn, indicating continued demand momentum and/or contribution from new products. Operating income declined 20.8% YoY to ¥2.649bn, implying cost pressure and/or mix deterioration despite higher sales. Net income was ¥2.226bn, down 13.0% YoY, with ordinary income broadly in line with operating income, suggesting limited non-operating distortions. DuPont analysis shows ROE of 3.07%, driven by a 6.31% net margin, low asset turnover of 0.324x, and moderate leverage of 1.50x; the low asset turn is typical of pharma balance sheets but still drags overall returns. Gross profit margin is reported at 23.2%, and EBITDA margin is 10.5%, yielding an operating margin of about 7.5%—a notable compression given the revenue growth. Cash conversion was weak this half: operating cash flow of ¥1.159bn equates to 0.52x net income, pointing to working capital build and/or accrual-driven earnings. The balance sheet appears solid, with total assets of ¥108.773bn, equity of ¥72.594bn (implying an equity ratio of around 66.7% despite the reported 0.0% placeholder), and modest leverage (debt-to-equity 0.43x). Liquidity is strong, with a current ratio of 253.7% and quick ratio of 189.2%, supported by sizeable current assets and working capital of ¥35.168bn. Interest burden is minimal (¥11m), and interest coverage is a very comfortable 240.8x, underscoring low financial risk. Financing cash outflow of ¥2.406bn suggests debt repayments and/or shareholder returns during the period, though dividends are unreported in the XBRL extract. The effective tax rate shown as 0.0% appears to be a placeholder; using disclosed income tax of ¥0.539bn and pre-tax profit proxied by net income plus tax, the implied tax rate is roughly 19–20%. EPS was ¥78.49; by back-solving from net income, the implied average shares outstanding are approximately 28.4 million, though share data in the extract are unreported. Overall, the company is growing revenue but facing operating deleveraging, resulting in subdued ROE and weaker cash conversion this half. Data caveat: several items show as zeros (equity ratio, cash balance, investing CF, dividends, share counts), which we treat as unreported, not true zeros; analysis focuses on available non-zero figures and internally consistent derived metrics.

Profitability Analysis

ROE decomposes to 3.07% = 6.31% net margin × 0.324x asset turnover × 1.50x financial leverage, indicating returns are primarily constrained by low asset utilization and modest margins rather than excessive leverage. Operating margin is approximately 7.5% (¥2.649bn EBIT / ¥35.253bn revenue), down YoY given the –20.8% EBIT decline vs. +8.9% revenue growth, signaling negative operating leverage. Gross margin is reported at 23.2%, and EBITDA margin is 10.5%; the spread between EBITDA and EBIT (D&A of ¥1.069bn) is typical for pharma with development assets and manufacturing footprint. Ordinary income (¥2.660bn) closely tracks operating income, implying limited reliance on non-operating gains/losses; interest expense is negligible at ¥11m. The effective tax burden, inferred at ~19–20%, is consistent with domestic operations and available tax shields. Margin quality appears pressured by higher SG&A (commercial investments, R&D) and/or product mix; without detailed cost breakdown, we infer limited pricing power or NHI revision impact. Operating leverage worked against earnings in the half: incremental margins turned negative despite revenue growth, suggesting a cost base that did not flex down or one-off costs.

Growth Assessment

Topline growth of 8.9% YoY to ¥35.253bn demonstrates a healthy revenue trajectory, likely reflecting new product contribution or volume gains offsetting price headwinds. However, profit growth lagged, with EBIT down 20.8% and net income down 13.0%, indicating that the quality of growth (profit conversion) deteriorated. EBITDA of ¥3.718bn (+/- unknown YoY) and margin of 10.5% suggest some buffer from D&A, but not enough to prevent operating deleveraging. Sustainability hinges on the durability of the growth drivers (new launches, indications, co-promotions) against ongoing NHI price revisions and generic erosion. With ordinary income nearly equal to operating income, growth is primarily operational rather than financial. Outlook near term: if SG&A/R&D intensity normalizes in H2, operating margins could recover seasonally; otherwise, full-year profit risk remains on the downside despite sales growth. Key watchpoints include launch trajectories, formulary uptake, and any updates on pipeline catalysts that can shift mix towards higher-margin products.

Financial Health

Liquidity is strong: current ratio 253.7% and quick ratio 189.2% indicate ample current assets relative to current liabilities. Working capital totals ¥35.168bn, supported by inventories of ¥14.757bn and other current assets; inventory levels should be monitored for obsolescence risk in a pharma context. Solvency is solid with total equity of ¥72.594bn against assets of ¥108.773bn, implying an equity ratio near 66.7% despite the 0.0% placeholder; leverage is modest (debt-to-equity 0.43x). Interest burden is minimal (¥11m), and interest coverage is 240.8x, indicating low refinancing risk. Capital structure appears conservative, affording flexibility to absorb R&D volatility and potential price revisions. No material non-operating income reliance is evident, lowering earnings quality risk from financial items.

Cash Flow Quality

Operating cash flow of ¥1.159bn is 0.52x net income (¥2.226bn), indicating weak cash conversion in the half, likely due to working capital build (e.g., inventory and receivables) and/or timing of payments. EBITDA of ¥3.718bn vs. OCF suggests cash leakage through working capital and taxes/interest, not non-cash earnings inflation. Free cash flow is unreported (investing CF shows as 0, treated as undisclosed), so true FCF cannot be determined from the extract. With financing CF at –¥2.406bn, the company likely used cash for debt repayment and/or shareholder returns; the period’s OCF was insufficient to cover these outflows without drawing on opening cash or prior liquidity. Working capital discipline will be critical in H2 to improve OCF/NI and FCF generation. Absent capex disclosure, we cannot assess maintenance vs. growth spend, a key input to long-term FCF quality.

Dividend Sustainability

Dividend per share is shown as 0.00 and payout ratio 0.0%, which we treat as unreported rather than true zeros; therefore, we cannot confirm dividends paid from this extract. Financing CF outflow of –¥2.406bn could include dividends and/or buybacks or debt service; the split is undisclosed. Given net income of ¥2.226bn and modest leverage, capacity for shareholder returns exists, but weak OCF (0.52x NI) in the half tempers confidence in near-term dividend growth without improved cash conversion. FCF coverage cannot be computed because investing cash flows (capex) are unreported. Policy outlook will depend on full-year profitability, NHI price revision impacts, and management’s capital allocation balance between R&D investment and returns.

Risk Assessment

Business Risks:

• NHI drug price revisions exerting downward pressure on margins
• Generic competition and lifecycle erosion of key products
• R&D execution risk and clinical/regulatory outcomes affecting pipeline value
• Product mix shifts impacting gross margin and SG&A intensity
• Manufacturing and quality control risks, including potential recalls
• Inventory obsolescence risk given high inventory levels in pharma
• Supply chain and API sourcing disruptions, including FX-driven input costs
• Market access and formulary adoption hurdles for new products

Financial Risks:

• Weak cash conversion this half (OCF/NI 0.52) indicating working capital volatility
• Potential capex or in-licensing cash needs not visible due to unreported investing CF
• Impairment risk on intangibles if pipeline setbacks occur
• Concentration risk if a few products drive a large share of profits
• Dividend/buyback commitments (if any) could pressure liquidity in periods of weak OCF

Key Concerns:

• Operating margin compression despite 8.9% revenue growth (negative operating leverage)
• Low ROE at 3.07% driven by low asset turnover
• Unreported cash and investing flows limit visibility on FCF and capital intensity
• Working capital build likely driving OCF shortfall vs. earnings

Investment Implications

Key Takeaways:

• Revenue growth (+8.9% YoY) is intact, but profitability lagged with EBIT –20.8% YoY
• ROE is low at 3.07% due to modest margins and low asset turnover; leverage is conservative
• Cash conversion was weak (OCF/NI 0.52), highlighting need for working capital improvement
• Balance sheet strength (implied equity ratio ~66.7%, D/E 0.43x) provides resilience
• Non-operating items are minimal; core performance drives earnings trajectory

Metrics to Watch:

• OCF/Net income and free cash flow once investing cash flows are disclosed
• Gross and operating margins, especially SG&A-to-sales and R&D-to-sales ratios
• Inventory days and receivables collection to assess working capital normalization
• Impact of NHI price revisions and product mix on margin trajectory
• Pipeline/regulatory milestones and launch uptake for higher-margin assets

Relative Positioning: Within Japan’s mid-cap pharma peer set, Asuka exhibits solid balance sheet strength and controlled financial risk but currently underperforms on profitability metrics (operating margin, ROE) and cash conversion; sustained topline growth with margin recovery and improved working capital discipline would be needed to close the gap.

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
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