Shinnihonseiyaku Co.,Ltd. FY2025 Q4 Earnings Report

Financial Highlights

• Net Sales: ¥41.14B
• Operating Income: ¥4.78B
• Net Income: ¥2.79B
• EPS: ¥120.48

Income Statement

Balance Sheet

Cash Flow Statement

Profitability Ratios

Year-over-Year Comparison

Share Information

Dividend 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

Shinnihon Pharmaceutical Co., Ltd. (49310) delivered steady top-line expansion and notable operating leverage in FY2025 Q4, with revenue of ¥41.14bn (+2.7% YoY) and operating income of ¥4.78bn (+14.5% YoY). Gross profit reached ¥31.81bn, translating to an exceptionally high gross margin of 77.3%, consistent with an asset-light, high-margin cosmetics/healthcare model. Operating margin improved to roughly 11.6%, signaling effective cost control, particularly in SG&A. Ordinary income of ¥4.89bn exceeded operating income, indicating modest non-operating gains; however, net income declined 8.6% YoY to ¥2.55bn due primarily to a higher tax burden. Based on income tax expense of ¥1.31bn and ordinary income, the implied effective tax rate is around 27%, which better explains the YoY contraction in bottom-line despite stronger operating performance. DuPont analysis shows ROE of 11.2%, driven by a 6.21% net margin, healthy asset turnover of 1.456x, and low financial leverage of 1.24x, implying returns are generated mainly from operations rather than balance-sheet leverage. Cash conversion was strong: operating cash flow (OCF) of ¥4.69bn was 1.84x net income, reflecting high earnings quality and favorable working capital dynamics. Free cash flow (FCF) was solid at ¥2.90bn after ¥1.79bn of investing cash outflows. The balance sheet is conservative: total assets of ¥28.25bn vs. liabilities of ¥5.43bn imply an equity ratio around 80.7% (our estimate using reported equity of ¥22.81bn), consistent with the low reported leverage (D/E 0.24x). Liquidity is robust with a current ratio of 4.73x and working capital of ¥18.19bn, providing ample buffer for operations and marketing investment. Interest expense was de minimis (¥1m), yielding extraordinarily high interest coverage, consistent with minimal debt. While dividends were not disclosed (zeros indicate non-disclosure), financing cash outflows of ¥2.10bn suggest capital returns and/or debt service; specific allocation cannot be confirmed from available data. Depreciation and amortization were modest at ¥0.29bn, reinforcing the asset-light profile and supporting cash earnings quality. Inventory stood at ¥2.03bn, manageable relative to sales, which supports the cash flow story and reduces obsolescence risk. The quarter evidences improving margin discipline and cash generation, albeit with a higher tax drag on net profit. Data limitations exist around cash balance, share count, equity ratio, and dividend policy disclosure; our analysis relies on available non-zero data and reasonable inferences where appropriate.

Profitability Analysis

ROE is 11.2% via DuPont: Net margin 6.21% x Asset turnover 1.456x x Financial leverage 1.24x. The low leverage factor indicates returns are primarily operational, not indebtedness-driven. Gross margin of 77.3% underscores strong pricing power and a premium product mix typical of D2C cosmetics/healthcare. Operating margin is approximately 11.6% (¥4.78bn / ¥41.14bn), expanding versus revenue growth thanks to SG&A discipline, pointing to positive operating leverage. Ordinary income exceeded operating income, suggesting small net non-operating gains; however, the step-down to net income reflects a normalized tax burden rather than financing costs. EBITDA was ¥5.07bn (margin 12.3%), implying limited non-cash charges (D&A ¥0.29bn) and highlighting cash-rich earnings. The divergence between operating income growth (+14.5% YoY) and revenue growth (+2.7% YoY) signals improving marketing efficiency and cost control, critical in customer acquisition-heavy models.

Growth Assessment

Revenue grew 2.7% YoY to ¥41.14bn, indicating stable demand but not outsized top-line momentum. Operating income rose 14.5% YoY to ¥4.78bn, implying strong operating leverage from SG&A optimization and/or improved repeat purchase dynamics. Net income declined 8.6% YoY to ¥2.55bn due to higher tax expense rather than operational weakness, suggesting underlying growth quality remains intact. The high gross margin supports sustainability of earnings provided customer acquisition costs remain disciplined and churn manageable. Asset turnover of 1.456x is healthy for the category, hinting at productive use of the balance sheet. Outlook-wise, if marketing efficiency gains persist, operating margin could continue to improve even on mid-single-digit sales growth. Investment cash outflows of ¥1.79bn likely reflect capacity, IT, or brand/product investments that can support future sales, though details are not disclosed. Revenue sustainability will hinge on retention, new product launches, and channel mix; disclosures on cohort behavior would refine the view. Overall profit quality appears strong, supported by cash conversion (OCF/NI 1.84x) and restrained D&A.

Financial Health

Total assets ¥28.25bn, liabilities ¥5.43bn, and equity ¥22.81bn indicate a very strong capital base; the implied equity ratio is ~80.7% (we treat the reported 0.0% as undisclosed). Current assets ¥23.06bn vs. current liabilities ¥4.87bn yield a current ratio of 4.73x and working capital of ¥18.19bn, indicating excellent short-term liquidity. Quick ratio was reported at 4.32x, consistent with a low inventory burden relative to liquid assets (despite cash being undisclosed). Debt-to-equity is 0.24x (liabilities/equity), reflecting low leverage and conservative solvency. Interest expense was only ¥1m with interest coverage ~4,782x, practically eliminating financing risk. The balance sheet provides ample flexibility for marketing, R&D, and shareholder returns without straining liquidity.

Cash Flow Quality

OCF of ¥4.69bn vs. net income of ¥2.55bn (OCF/NI 1.84x) indicates high earnings quality with supportive working capital movements and modest non-cash charges. FCF of ¥2.90bn (OCF minus investing outflows of ¥1.79bn) is robust, covering potential capital needs and leaving room for capital returns. EBITDA of ¥5.07bn vs. OCF of ¥4.69bn suggests limited cash leakage and efficient conversion, considering D&A of ¥0.29bn. Working capital appears well-managed: inventories at ¥2.03bn are modest against sales, and current assets substantially exceed current liabilities. Investing CF at -¥1.79bn likely includes capex and possibly intangibles; absent detail, we treat it as growth and maintenance investments collectively. Financing CF at -¥2.10bn points to outflows (dividends, buybacks, or debt repayment), but line-item specifics are not disclosed.

Dividend Sustainability

Dividend data (DPS, payout, FCF coverage) were not disclosed in the provided XBRL (zeros are placeholders). On capacity, net income of ¥2.55bn and FCF of ¥2.90bn suggest ample theoretical headroom for distributions after investment, given low leverage and strong liquidity. Without confirmed DPS or policy guidance, we cannot compute an actual payout ratio or FCF coverage. If management targets a stable payout, current cash generation could likely support it alongside reinvestment; however, policy, buyback usage, and cash balance levels are undisclosed. We would monitor future disclosures for explicit dividend policy, historical continuity, and any buyback authorizations that may substitute for cash dividends.

Risk Assessment

Business Risks:

• Marketing efficiency risk in a D2C-driven model (customer acquisition cost inflation, digital channel ROI variability).
• Product cycle and brand concentration risk if a few hero SKUs drive a disproportionate share of sales.
• Competitive intensity in skincare/healthcare leading to pricing pressure and higher promotional spend.
• Regulatory and quality control risks in cosmetics/healthcare products (claims, labeling, compliance).
• Channel mix shifts (e-commerce vs. offline) affecting margin structure and inventory needs.

Financial Risks:

• Potential tax rate normalization or one-off tax items creating volatility in net income (implied ~27% tax rate this period).
• Working capital swings (particularly receivables and marketing prepayments) affecting quarterly cash conversion.
• Currency exposure on imported raw materials or overseas marketing, if applicable (not disclosed).
• Concentration of cash with limited disclosure (cash balance not reported), though liquidity ratios are strong.

Key Concerns:

• Net income decline (-8.6% YoY) driven by higher tax burden despite stronger operations.
• Limited disclosure on dividends and cash balances restricts assessment of shareholder return policy and net cash.
• Sustainability of operating leverage hinges on continued SG&A discipline and customer retention.

Investment Implications

Key Takeaways:

• Solid topline (+2.7% YoY) with strong operating leverage (+14.5% YoY OI) and high gross margin (77.3%).
• ROE of 11.2% is achieved with minimal leverage (D/E 0.24x), indicating quality-driven returns.
• Excellent liquidity (current ratio 4.73x; large working capital) and negligible interest burden.
• High cash conversion (OCF/NI 1.84x) and positive FCF (¥2.90bn) support reinvestment and potential capital returns.
• Net income softness reflects tax effects rather than operational deterioration.

Metrics to Watch:

• SG&A ratio (especially advertising/promotion) and its elasticity to revenue.
• Repeat purchase rates, customer cohorts, and CAC/LTV to gauge sustainability of growth.
• Inventory turnover and returns to monitor product cycle health.
• Tax rate trajectory and any discrete tax items.
• Capital allocation: capex/intangibles split, buybacks vs. dividends (once disclosed).

Relative Positioning: Within Japan-listed cosmetics/healthcare peers, the company exhibits superior gross margins, conservative leverage, and strong cash conversion, positioning it as an asset-light, quality-focused operator with moderate ROE driven primarily by operations rather than balance sheet risk.

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