| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue / Net Sales | ¥2016.8B | ¥1890.2B | +6.7% |
| Operating Income / Operating Profit | ¥158.9B | ¥40.5B | +292.5% |
| Ordinary Income (Pre-tax Profit) | ¥142.7B | ¥31.6B | +351.5% |
| Net Income / Net Profit | ¥104.4B | ¥119.7B | -12.8% |
| ROE | 5.8% | 6.9% | - |
For the fiscal year ended March 2026, Revenue was ¥2016.8B (YoY +¥126.5B +6.7%), Operating Income was ¥158.9B (YoY +¥118.4B +292.5%), Ordinary Income was ¥142.7B (YoY +¥111.1B +351.5%), and Net Income was ¥104.4B (YoY ▲¥15.3B ▲12.8%). Revenue growth was supported by expansion in cardiovascular, central nervous system, and metabolic pharmaceuticals. Operating Income expanded 3.9x due to a substantial reduction in Other Expenses from ¥170.35B in the prior year to ¥44.99B, improving the operating margin from 2.1% to 7.9% (+580bp). Net Income decreased due to the absence of prior-year non-recurring business gain of ¥97.96B and a current-period non-recurring business loss of ¥10.98B; on a continuing-operations basis, profit rose significantly from ¥21.73B to ¥115.36B (5.3x). The revenue structure is normalizing: gross margin slightly declined to 29.2%, but improved SG&A control (12.9% SG&A ratio) drove notable recovery in operating-stage profitability.
[Revenue] Revenue of ¥2016.8B (YoY +6.7%) was driven by cardiovascular drugs ¥457.96B (+7.6%), central nervous system drugs ¥281.40B (+9.5%), other metabolic pharmaceuticals ¥249.55B (+21.4%), and gastrointestinal drugs ¥223.10B (+9.3%). The three core areas—cardiovascular, CNS, and metabolic—totaled ¥758.91B, representing 37.6% of sales and contributing a total increase of ¥65.68B. Meanwhile, antibiotic formulations ¥93.84B (▲12.0%) and chemotherapeutic agents ¥59.84B (▲14.8%) declined due to price revisions and competitive pressures. Cost of goods sold was ¥1,428.8B (70.8% of sales), yielding a gross margin of 29.2% (prior year 29.8%, ▲60bp), suggesting residual pricing and cost pressures. Overall, the portfolio shift toward core areas underpinned revenue growth.
[Profit & Loss] Gross profit was ¥587.9B (YoY +¥31.4B +5.6%), while SG&A was ¥260.6B (YoY +¥25.4B +10.8%), outpacing revenue growth and increasing the SG&A ratio from 12.4% to 12.9% (+50bp). R&D expense was ¥123.9B (6.1% of sales), down ¥2.1B YoY, appropriate for a generics-focused company. The largest operating improvement was the substantial reduction in Other Expenses, down ¥125.4B from ¥170.35B to ¥44.99B, and impairment losses halved from ¥36.49B to ¥17.36B. As a result, Operating Income expanded to ¥158.9B (Operating margin 7.9%), 3.9x the prior year ¥40.5B. Financial results showed finance costs of ¥17.7B (including interest expense ¥11.4B) exceeding financial income ¥1.4B, producing a net finance charge of ▲¥16.2B; operating improvements absorbed this, lifting Ordinary Income to ¥142.7B (YoY +351.5%). After corporate taxes of ¥27.4B (effective tax rate 19.2%), continuing-operations profit was ¥115.36B (up 5.3x from ¥21.73B). However, a non-recurring business loss of ▲¥10.98B (prior year +¥97.96B) led to a final Net Income of ¥104.4B (▲12.8%). In summary: significant revenue growth and large operating profit improvement on a continuing basis, but net decline driven by non-recurring items.
Segment-level operating profit disclosure is not provided, but by therapeutic category, cardiovascular drugs were the largest share at 22.7% (¥457.96B, +7.6%), CNS drugs 14.0% (¥281.40B, +9.5%) maintained high growth, and metabolic pharmaceuticals ¥249.55B (+21.4%) recorded the highest growth, likely reflecting demand expansion and new product launches. Gastrointestinal drugs ¥223.10B (+9.3%) and hematology/fluids drugs ¥197.78B (+11.0%) showed stable growth. Conversely, antibiotic formulations ¥93.84B (▲12.0%) and chemotherapeutic agents ¥59.84B (▲14.8%) declined due to intensified generic entry and price pressure. The top five areas (cardiovascular, CNS, metabolic, gastrointestinal, hematology) accounted for 60.6% of sales, indicating portfolio concentration in high-margin, growth areas.
[Profitability] Operating margin of 7.9% improved +580bp from 2.1% a year earlier, offsetting a headwind of gross margin decline to 29.2% (▲60bp) through SG&A management and reduction of special-item expenses. EBITDA (Operating Income + Depreciation & Amortization ¥160.0B) is approximately ¥318.9B, or 15.8% of sales, indicating improved cash-generation potential. ROE is 5.9%, exceeding the industry median differential of ▲19.7% by a wide margin, though there remains room to improve relative to historical company levels; Net Profit Margin is 5.2% and leverage is 2.02x contributing to ROE. [Cash Quality] Operating Cash Flow (OCF) is ¥74.3B versus Net Income ¥104.4B, a ratio of 0.71x, below the benchmark of 0.8x; increases in inventories ¥75.6B and the reversal of provisions ¥169.0B pressured cash conversion. OCF/EBITDA ratio is approximately 0.23x, low and indicating urgent need to improve working capital. [Investment Efficiency] Capital expenditures ¥134.2B and intangible asset acquisitions ¥110.6B total ¥244.8B, representing 12.1% of sales, reflecting continuation of growth investments. CapEx below Depreciation & Amortization (¥160.0B) carries asset aging risk, while emphasis on intangibles suggests strengthening future competitiveness. [Financial Soundness] Equity Ratio is 49.6% and D/E ratio is 1.02x, indicating solid capital base; interest coverage (EBIT/Finance Costs) is 9.0x, showing low interest burden. Current ratio is 247%, so short-term liquidity is healthy, but inventories ¥1,176.1B represent 32.7% of total assets and are the primary source of cash tie-up.
Operating Cash Flow was ¥74.3B, a 73.3% decline from ¥278.5B in the prior year, calculated from operating cash subtotal ¥102.2B after interest and tax payments. The main drivers were inventory increase ▲¥75.6B and reversal of provisions ▲¥169.0B, with the latter reflecting the unwind of provisions of ¥169.92B recorded in the prior period which constrained liquidity. Increase in trade receivables ▲¥26.1B also suggests slower collections. Investing Cash Flow was ▲¥229.0B, centered on CapEx ▲¥134.2B and intangible acquisitions ▲¥110.6B, partially offset by subsidiary sale proceeds ¥16.2B and proceeds from tangible asset sales ¥0.1B. Free Cash Flow was ▲¥154.7B, a large negative driven by weak OCF and aggressive investment. Financing Cash Flow was +¥55.9B, with proceeds from long-term borrowings ¥205.0B and bond issuance ¥74.6B offsetting long-term borrowings repayments ▲¥149.7B, net increase in short-term borrowings ¥6.7B, dividends ▲¥62.4B, and share buybacks ▲¥333.2B. As a result, cash decreased by ▲¥97.8B from ¥288B to ¥289.9B (note: reported numbers as provided). Total shareholder returns were ¥395.6B (dividends + share buybacks), far exceeding FCF ▲¥154.7B and reliant on external financing. FX impact +¥0.8B was negligible. Improving working capital management and investment efficiency are the focus to restore cash flow.
Continuing-operations profit of ¥115.4B was offset by non-recurring business loss ▲¥11.0B, reducing Net Income to ¥104.4B; the main reason for the YoY decline was the disappearance of prior-year non-recurring business gain ¥97.96B. Other Expenses of ¥44.99B were substantially reduced from ¥170.35B in the prior year; impairment losses ¥17.36B (prior year ¥36.49B) and disposal losses on fixed assets ¥3.16B remain as temporary factors. Of finance costs ¥17.7B, interest expense was ¥11.4B and lease payments ¥18.2B are recurring burdens; net finance charge ▲¥16.2B (after finance income ¥1.4B) reflects capital structure. The gap between Operating Income ¥158.9B and Ordinary Income ¥142.7B (▲¥16.2B) is entirely due to finance items, indicating limited non-operating distortions. Comprehensive income of ¥108.9B comprises Net Income ¥104.4B plus Other Comprehensive Income +¥4.5B (fair value changes of financial assets +¥4.49B, foreign currency translation differences +¥0.03B), so divergence from Net Income is minor. The difference between OCF ¥74.3B and Net Income ¥104.4B (▲¥30.1B) is mainly due to working capital increases and reversal of provisions, highlighting a gap between accounting profit and cash and raising concerns about earnings quality.
Full-year guidance projects Revenue ¥2084.0B (vs. current year +¥67.2B +3.3%), Operating Income ¥272.0B (vs. current year +¥113.1B +71.1%), and Net Income ¥186.0B (vs. current year +¥81.6B +78.2%), anticipating revenue and profit growth. Operating margin is planned to improve to 13.0% (+510bp), contingent on cost optimization and further reduction of special-item expenses. Progress toward this fiscal year’s results stands at 96.8% for Revenue, 58.4% for Operating Income, and 56.1% for Net Income, indicating profit concentration in the second half; achieving stable full-year profitability is a challenge for next year. EPS is planned at ¥161.09, and dividend guidance is ¥28.00 per share implying a Payout Ratio of 17.4%, a conservative level and normalization from this year’s high payout (60.9%). Key to achieving forecasts will be inventory reduction to improve OCF, support for gross margin, and containment of SG&A growth.
Dividend is ¥55 per share (interim ¥27, year-end ¥28), with a Payout Ratio of 60.9%, representing an effective dividend cut versus prior-year ¥78 (adjusted for stock split). Total dividends amount to ¥62.35B, which is 83.9% of Operating Cash Flow ¥74.3B—high but insufficient to cover Free Cash Flow of ▲¥154.7B, raising concerns about cash backing. Share buybacks totaled ¥333.2B during the period, and at year-end treasury shares were canceled (¥332.4B), leaving year-end treasury shares at ¥0.03B, effectively nearly eliminated. Total Return Ratio (dividends + share buybacks ÷ Net Income) is approximately 379%, extremely high and unlikely to be sustainable in a single year. Next-year dividend guidance ¥28 (Payout Ratio 17.4%) represents a realistic correction; share buybacks are expected to be implemented flexibly. Going forward, capital allocation aligned with FCF generation is required.
Revenue pressure from drug price revisions and competition: Gross margin of 29.2% declined ▲60bp YoY; intensified price competition in generics and drug price revisions continue to exert pressure. Revenue declines in antibiotics (▲12.0%) and chemotherapeutic agents (▲14.8%) indicate adverse trends in both price and demand, and drug price revisions in core areas pose risk to gross margin. Defending next-year gross margin will require product-mix improvement and cost reduction.
Cash tie-up and obsolescence risk from persistently high inventory levels: Inventories ¥1,176.1B account for 32.7% of total assets, up ¥76.1B YoY. Inventory turnover is estimated at approximately 300 days, posing risks of valuation loss and write-offs from demand volatility and expiration. Inventory increase ▲¥75.6B versus OCF ¥74.3B hindered cash conversion; delayed inventory optimization pressures both financial flexibility and profitability.
Financial pressure from total returns exceeding FCF: Total returns of ¥395.6B (dividends ¥62.35B + share buybacks ¥333.2B) versus FCF ▲¥154.7B create a significant shortfall. This year’s shortfall was funded by external borrowings (long-term ¥205.0B, bonds ¥74.6B), but high returns without working capital improvement risk damaging financial health. Next-year Payout Ratio is planned to decline to 17.4%, but achieving FCF positivity and sustainable returns remain key challenges.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Return on Equity | 5.9% | -19.7% (-58.1%–4.6%) | +25.6pt |
| Operating Margin | 7.9% | -94.2% (-358.4%–8.6%) | +102.1pt |
| Net Profit Margin | 5.2% | -101.5% (-373.7%–5.9%) | +106.7pt |
Profitability metrics significantly exceed industry medians, supported by improved earnings structure in continuing operations.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth (YoY) | 6.7% | -0.6% (-22.4%–13.3%) | +7.3pt |
Revenue growth of +6.7% ranks above the industry median of ▲0.6%, supported by concentration in core areas.
※Source: Company compilation
Operating-stage profitability is normalizing, with Operating Margin 7.9% and EBITDA margin 15.8%. The large reduction in Other Expenses contributed, but slight gross margin deterioration and rising SG&A ratio remain ongoing management issues. Achieving next-year’s planned Operating Margin of 13.0% will require balancing product-mix improvement and cost optimization.
Elevated inventory levels and working capital cash tie-up are constraining cash generation: OCF/Net Income 0.71x and OCF/EBITDA 0.23x are weak versus peers. Shortening inventory days and optimizing provisions and receivables collection are critical to restore FCF and sustain financial health and shareholder returns next year.
Total Return Ratio of ~379% is an outlier for the year and unsustainable if funded externally. The next-year payout guidance of 17.4% is realistic, but the degree of FCF generation and flexibility in share buybacks will determine credibility of future shareholder return policy. Extending debt (bonds/borrowings +¥205.1B) increases financial resilience; however, inventory reduction and cash conversion improvement are prerequisites for improving capital efficiency.
This report is an earnings analysis document automatically generated by AI through analysis of XBRL financial statement data. It does not constitute a recommendation to invest in any specific security. Industry benchmarks are reference information compiled by our firm based on publicly disclosed financial statements. Investment decisions are your own responsibility; consult a professional advisor as necessary prior to making investment decisions.