MEDIPAL HOLDINGS CORPORATION FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥1.90T
• Operating Income: ¥25.08B
• Net Income: ¥27.57B
• EPS: ¥106.80

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

MediPal Holdings reported FY2026 Q2 (cumulative) consolidated results under JGAAP showing steady topline growth but softer operating profitability. Revenue was ¥1,897.6bn (+4.0% YoY), while operating income declined to ¥25.1bn (-7.7% YoY), indicating negative operating leverage in the period. Net income increased modestly to ¥22.1bn (+1.7% YoY), supported by stronger non-operating contributions (ordinary income ¥34.3bn exceeded operating income) and contained financing costs. Gross profit was ¥126.4bn, implying a gross margin of 6.7%, consistent with the structurally low-margin profile of Japanese pharmaceutical and healthcare distribution. Operating margin was 1.32% and EBITDA margin 1.8%, both compressed relative to revenue growth, suggesting elevated SG&A and/or mix pressures. DuPont analysis shows net margin of 1.16%, asset turnover of 0.995x (period-basis) and financial leverage of 2.49x, yielding an ROE of 2.88%. Given the interim period, the asset turnover is influenced by half-year denominators and should not be annualized without adjustment. Liquidity remains healthy with a current ratio of 127% and quick ratio of 109%, underpinned by disciplined working capital management; inventories stood at ¥178.1bn, implying roughly 19 days of inventory on hand versus COGS for the half year. The balance sheet is sound: total assets ¥1,907.6bn and total equity ¥766.1bn imply an equity ratio around 40% (despite the disclosed equity ratio field showing 0%, which is unreported rather than zero). Interest expense was only ¥3.0m, translating into extremely high interest coverage, reflecting low funding costs and conservative leverage (total liabilities/equity 1.39x). Operating cash flow was robust at ¥41.8bn, equating to an OCF/Net Income ratio of 1.89x, which indicates good earnings cash conversion. Investing and cash & equivalents line items were unreported (shown as 0), so free cash flow and cash balances cannot be reliably assessed from the provided data. Dividend per share and payout ratio fields are also unreported; however, financing cash outflows of ¥14.4bn suggest capital returns and/or debt repayments occurred. Overall, the quarter highlights stable demand and resilient cash generation but softer operating leverage, with profitability relying more on ordinary income than core operations. The company’s financial position appears solid, and liquidity is adequate to support ongoing operations and inventory needs. Management focus should remain on cost discipline, mix optimization, and working capital efficiency to restore operating margin momentum. Key data limitations include unreported cash, investing cash flows, DPS, and share count, all of which constrain precision in FCF and per-share analyses.

Profitability Analysis

ROE_decomposition: ROE 2.88% = Net Profit Margin 1.16% × Asset Turnover 0.995× × Financial Leverage 2.49×. The ROE is modest, with leverage contributing meaningfully, while margins and turnover are constrained by the low-margin distribution model and interim period effects. margin_quality: Gross margin 6.7% aligns with historical industry norms. Operating margin of 1.32% trails revenue growth (-7.7% YoY in operating income vs +4.0% revenue), pointing to SG&A inflation, mix shifts, or timing effects. Ordinary income (¥34.3bn) materially exceeds operating income (¥25.1bn), implying reliance on non-operating items (e.g., equity method gains, financial income) to support bottom line. operating_leverage: Negative in the period: revenue +4.0% vs operating income -7.7%. This suggests fixed-cost absorption pressure or cost creep outweighing volume gains. EBITDA of ¥33.6bn and EBITDA margin 1.8% indicate limited cushion to absorb incremental costs.

Growth Assessment

revenue_sustainability: Topline grew 4.0% YoY to ¥1.90tn, consistent with stable pharmaceutical distribution volumes and possible price pass-throughs. Given the sector’s defensive demand, revenue growth appears sustainable, though pricing and NHI revisions can moderate momentum. profit_quality: Net income +1.7% YoY despite weaker operating income suggests profit support from non-operating items. OCF/NI at 1.89x indicates solid cash realization, improving confidence in earnings quality despite margin pressure. outlook: Near-term growth likely moderate, anchored by defensive healthcare demand. Margin recovery hinges on SG&A control, logistics efficiency, and product-mix management. Watch for the effect of drug price revisions, biosimilar penetration, and specialty distribution scaling on gross-to-operating margin conversion.

Financial Health

liquidity: Current ratio 127.1% and quick ratio 109.4% signal adequate near-term liquidity. Working capital is ¥273.3bn, supported by manageable inventory levels (¥178.1bn). Cash and equivalents are unreported, limiting precise cash ratio assessment. solvency: Total liabilities of ¥1,067.0bn vs equity of ¥766.1bn yield a debt-to-equity ratio of 1.39x. Interest expense is only ¥3.0m, with implied interest coverage around 8,361x, indicating very low financial risk from interest burden. capital_structure: Implied equity ratio is approximately 40.2% (¥766.1bn/¥1,907.6bn), demonstrating a conservative balance sheet even though the disclosed equity ratio field is unreported. Leverage (assets/equity) of 2.49x supports ROE without imposing substantial refinancing risk.

Cash Flow Quality

earnings_quality: OCF of ¥41.8bn vs net income of ¥22.1bn (OCF/NI 1.89x) indicates strong earnings cash conversion, likely aided by working capital discipline. FCF_analysis: Investing CF is unreported (shown as 0), preventing a reliable free cash flow calculation for the period. As such, FCF coverage of dividends and growth capex cannot be assessed from provided data. working_capital: Inventories at ¥178.1bn vs COGS ¥1,698.2bn imply roughly 19 days of inventory on hand for the half-year (178.1/1,698.2×183 days). Receivables/payables details are not disclosed, but the quick ratio above 100% suggests receivables are substantial and supportive of liquidity.

Dividend Sustainability

payout_ratio_assessment: DPS and payout ratio are unreported. With EPS at ¥106.80 (interim), a typical sector payout would be moderate; however, no definitive conclusion can be drawn without actual DPS. FCF_coverage: Not assessable due to unreported investing cash flows and cash balance. While OCF is strong, FCF coverage of dividends cannot be computed. policy_outlook: Financing cash outflow of ¥14.4bn suggests ongoing shareholder returns and/or debt repayment. Sustainability will depend on maintaining OCF strength and moderating capex requirements; explicit guidance or historical policy would be needed for a firmer view.

Risk Assessment

Business Risks:

• Drug price revisions and reimbursement cuts impacting gross margins
• Mix shifts (generic/biosimilar penetration) diluting gross profit
• Logistics cost inflation (fuel, labor) pressuring SG&A and operating margin
• Customer consolidation and competitive pricing dynamics in wholesale distribution
• Supply chain disruptions affecting inventory availability and service levels

Financial Risks:

• Working capital intensity and potential receivables collection risk
• Margin compression reducing cash generation if SG&A not contained
• Non-operating income reliance creating volatility in ordinary vs operating income
• Interest rate normalization (though current interest burden is minimal)

Key Concerns:

• Negative operating leverage in the period despite revenue growth
• Dependence on non-operating items to bridge operating profit shortfall
• Limited visibility on cash, capex, and FCF due to unreported investing CF and cash balances

Investment Implications

Key Takeaways:

• Revenue grew 4.0% YoY to ¥1.90tn, demonstrating resilient demand
• Operating income declined 7.7% YoY, highlighting margin pressure and negative operating leverage
• Net income increased 1.7% YoY, aided by non-operating contributions
• Liquidity is solid (current ratio 127%, quick ratio 109%) with working capital of ¥273bn
• Balance sheet conservative with implied equity ratio ~40% and nominal interest expense
• OCF/NI at 1.89x signals strong earnings cash conversion
• Key data gaps (cash, investing CF, DPS, share count) limit FCF and per-share analysis

Metrics to Watch:

• Operating margin and SG&A ratio trajectory
• Ordinary income composition (non-operating items vs core operations)
• Inventory days and receivables turnover
• OCF trend vs net income and capex requirements
• Impact of drug price revisions on gross margin
• EBITDA margin recovery and cost efficiency initiatives

Relative Positioning: Within Japan’s pharmaceutical and healthcare distribution peers, MediPal exhibits typical low margins, solid liquidity, and conservative leverage. Current-period profitability underperformed on operating leverage versus topline, with stronger reliance on non-operating income to support net earnings.

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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