KOBAYASHI PHARMACEUTICAL CO.,LTD. FY2025 Q3 Earnings Report

Financial Highlights

• Net Sales: ¥112.04B
• Operating Income: ¥11.49B
• Net Income: ¥5.35B
• EPS: ¥91.60

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

Kobayashi Pharmaceutical (4967) reported FY2025 Q3 consolidated results under JGAAP with revenue of ¥112.0bn, down 2.1% YoY, indicating slight top-line softness. Gross profit was ¥62.7bn, yielding a high gross margin of 56.0%, but operating income declined sharply by 32.3% YoY to ¥11.5bn, highlighting negative operating leverage. Ordinary income of ¥12.93bn exceeded operating income by ¥1.44bn, implying material positive non-operating contributions. Despite weaker operating profit, net income rose 27.4% YoY to ¥6.81bn, and the net margin was 6.08%, suggesting that non-operating and/or below-the-line factors dominated the YoY improvement. The implied effective tax rate based on reported income tax and ordinary income is approximately 14.9%, but the large gap between post-tax ordinary profit and net income points to significant extraordinary items and/or non-controlling interests. DuPont analysis shows ROE at 3.21%, driven by a 6.08% net margin, low asset turnover of 0.429x, and low financial leverage of 1.23x, collectively indicating modest equity returns relative to a large equity base. The balance sheet is conservative, with total assets of ¥261.5bn and total equity of ¥212.0bn, implying an equity ratio around 81% (derived), despite the reported equity ratio being unreported. Liquidity appears very strong: current assets of ¥144.5bn vs current liabilities of ¥46.4bn produce a current ratio of 311% and a quick ratio of 279%. Total liabilities are ¥51.9bn, equating to a low debt-to-equity ratio of 0.24x, and interest expense is minimal at ¥23m, with interest coverage of roughly 500x. Inventory stood at ¥15.14bn; using YTD cost of sales of ¥51.76bn, inventory turns are about 3.4x (≈107 days), acceptable for a diversified consumer health portfolio but worth monitoring given softer sales. Cash flow statement items are unreported in this dataset, so operating cash flow, free cash flow, and cash balances cannot be assessed from the provided figures. Dividend data are also unreported; thus payout and coverage cannot be evaluated from this set. Overall, the company retains a fortress balance sheet and high gross margin profile, but Q3 YTD shows pressure at the operating level and a reliance on non-operating/below-the-line items to support net income. The sustainability of net profit growth is uncertain without recurring cash flow evidence and clarity on extraordinary factors. Key watchpoints include recovery in operating margin, inventory normalization, and the trajectory of non-operating items into Q4. Data limitations (notably cash flow, dividends, and per-share base) constrain the depth of cash and capital allocation analysis.

Profitability Analysis

ROE_decomposition: ROE 3.21% = Net margin 6.08% × Asset turnover 0.429 × Financial leverage 1.23. The low asset turnover and modest leverage cap ROE despite a reasonable net margin. margin_quality: Gross margin is strong at 56.0% (gross profit ¥62.70bn on revenue ¥112.04bn), but operating margin compresses to ~10.3% (operating income ¥11.50bn), reflecting cost inflation, SG&A intensity, and/or adverse mix. Net margin at 6.08% is supported by non-operating gains (ordinary income > operating income by ¥1.44bn) but likely diluted by below-the-line items given the large gap between post-tax ordinary profit and net income. operating_leverage: Revenue decreased 2.1% YoY while operating income fell 32.3% YoY, indicating pronounced negative operating leverage. This suggests fixed cost absorption pressure and/or step-ups in marketing, R&D, or logistics costs.

Growth Assessment

revenue_sustainability: Top-line declined 2.1% YoY to ¥112.04bn, implying modest demand softness or product/mix headwinds. Sustainability will depend on new product momentum, channel recovery, and pricing power. profit_quality: Ordinary income (¥12.93bn) exceeded operating income, indicating non-operating tailwinds; however, the drop in operating income (-32.3% YoY) points to weakening core profitability. The implied effective tax rate of ~14.9% (¥1.93bn/¥12.93bn) and a sizable gap to net income suggest material extraordinary factors or minority interest effects, reducing visibility on recurring earnings. outlook: Absent cash flow disclosure, it is difficult to verify earnings convertibility. Recovery in operating margin and stabilization of sales are needed to underpin growth into Q4. Non-operating support may not be repeatable, so a return to operating profit growth is the key determinant of earnings sustainability.

Financial Health

liquidity: Current assets ¥144.47bn vs current liabilities ¥46.42bn yield a current ratio of 311% and a quick ratio of 279%, indicating ample near-term liquidity. Working capital is ¥98.05bn. solvency: Total liabilities of ¥51.90bn vs equity of ¥212.04bn imply a debt-to-equity ratio of 0.24x and an equity ratio of roughly 81% (derived from the balance sheet). Interest expense is ¥23m with coverage of ~500x, indicating very low financial risk. capital_structure: Leverage is intentionally conservative (financial leverage 1.23x per DuPont), providing balance sheet resilience but depressing ROE given a large equity base.

Cash Flow Quality

earnings_quality: Cash flow data are unreported in the provided dataset; thus OCF/Net Income of 0.00 should not be interpreted as true cash conversion. Without OCF details, earnings quality cannot be validated. FCF_analysis: Free cash flow cannot be computed due to missing operating and investing cash flow figures. Capex levels and working capital movements are unknown. working_capital: Inventories are ¥15.14bn; using YTD cost of sales of ¥51.76bn, inventory turnover is ~3.42x (≈107 days). Receivables and payables details are not provided; overall working capital is sizable at ¥98.05bn, which supports liquidity but may weigh on asset turnover.

Dividend Sustainability

payout_ratio_assessment: Dividend per share and payout ratio are unreported in this dataset; the shown zeros are placeholders and not actual values. Therefore, payout sustainability cannot be quantified. FCF_coverage: Free cash flow is unreported; FCF coverage of dividends cannot be assessed from the provided data. policy_outlook: With a strong balance sheet (low leverage, high equity) but weaker operating earnings, dividend capacity likely hinges on core OCF resiliency. Absent cash flow and policy disclosures, visibility on dividend trajectory is limited.

Risk Assessment

Business Risks:

• Demand softness in key OTC and consumer health categories leading to negative operating leverage
• Product mix and pricing pressures compressing operating margins despite high gross margins
• Inventory normalization risk if sales trends weaken further (inventory ~107 days)
• Exposure to raw material and logistics cost volatility
• Potential extraordinary items and recall/quality issues that can create earnings volatility
• Channel and competitive intensity across domestic drugstores and e-commerce

Financial Risks:

• Low, given minimal interest expense (¥23m) and strong liquidity; primary risk is earnings, not balance sheet
• ROE dilution from an oversized equity base relative to sales (asset turnover 0.429x)
• Limited visibility on cash generation due to unreported cash flow statements

Key Concerns:

• Sharp YoY decline in operating income (-32.3%) against modest revenue decline (-2.1%)
• Dependence on non-operating items to lift ordinary income above operating income
• Large gap between implied post-tax ordinary profit and reported net income, signaling material below-the-line items
• Absence of cash flow and dividend data in the provided set, constraining assessment of earnings convertibility and capital returns

Investment Implications

Key Takeaways:

• Top-line down 2.1% YoY to ¥112.0bn with pronounced negative operating leverage (operating income -32.3% YoY)
• High gross margin (56.0%) but operating margin compressed to ~10.3%
• Ordinary income exceeded operating income by ¥1.44bn, reflecting non-operating support
• Net income grew 27.4% YoY to ¥6.81bn, but sustainability is uncertain given below-the-line effects
• ROE modest at 3.21% due to low asset turnover (0.429x) and low leverage (1.23x)
• Very strong balance sheet: equity ~¥212.0bn, liabilities ~¥51.9bn, current ratio 311%, D/E 0.24x
• Inventory turnover ~3.4x (≈107 days); monitor for potential normalization needs
• Cash flow and dividend data are not disclosed in this set; cannot assess FCF or payout coverage

Metrics to Watch:

• Quarterly operating margin progression and SG&A intensity
• Revenue trajectory and pricing/mix contributions into Q4
• Inventory days and working capital turns
• Non-operating income components and extraordinary items impacting net income
• OCF and FCF once disclosed, and capex requirements
• Any updates on dividend policy and buyback utilization

Relative Positioning: Balance sheet strength and liquidity are superior relative to typical consumer healthcare peers, but current-period profitability momentum is weaker, with low ROE and elevated operating sensitivity to modest revenue declines.

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