TOHO HOLDINGS CO.,LTD. FY2026 Q2 Earnings Report

Financial Highlights

• Net Sales: ¥767.90B
• Operating Income: ¥7.26B
• Net Income: ¥5.39B
• EPS: ¥99.12

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

Toho Holdings (8129) delivered modest top-line growth in FY2026 Q2 with revenue up 1.7% YoY to ¥767.9bn, consistent with the low-growth, high-volume dynamics of pharmaceutical distribution. Gross profit reached ¥58.4bn, implying a gross margin of 7.6%, which is typical for the sector and suggests stable trading terms with manufacturers and customers. Operating income declined 1.7% YoY to ¥7.26bn, compressing the operating margin to roughly 0.95%, indicating mild negative operating leverage despite revenue growth. Ordinary income of ¥8.33bn exceeded operating income by about ¥1.07bn, pointing to supportive non-operating items such as financial income or equity-method gains and minimal interest burden. Net income rose 16.0% YoY to ¥6.24bn, lifting net margin to 0.81%, aided by the favorable non-operating balance and possibly non-recurring items. DuPont analysis shows ROE at 2.34%, driven by a thin net margin (0.81%), steady asset turnover (1.017x), and moderate financial leverage (2.83x). The combination implies ROA of roughly 0.82% and underscores the structurally low-margin profile of drug wholesale. Liquidity remains sound: current ratio is 129.5% and quick ratio 108.1%, supported by substantial working capital of ¥124.9bn. Based on total equity of ¥267.0bn and total assets of ¥754.9bn, the implied equity ratio is approximately 35.4% (the reported equity ratio metric is not disclosed), indicating a conservative balance sheet for a distributor. Interest expense is only ¥22m with an interest coverage of ~330x, leaving ample cushion against rate changes. Operating cash flow was negative at -¥10.7bn, resulting in an OCF/Net Income ratio of -1.72x, which likely reflects seasonal working capital outflows (inventory build and/or slower collections). Investing cash flow and cash & equivalents were not disclosed in the provided data, limiting visibility on free cash flow and liquidity buffers this quarter. EBITDA was ¥10.08bn (1.3% margin), consistent with the low operating margin model but showing limited operating leverage in the period. EPS came in at ¥99.12; however, outstanding shares data were not disclosed, constraining per-share trend analysis and valuation inference. Overall, fundamentals reflect steady revenue, slightly weaker operating profitability, strong ordinary income support, and temporary cash conversion pressure typical of the distribution cycle. The outlook hinges on working capital normalization, cost discipline, and managing margin headwinds from NHI drug price revisions. Data gaps (equity ratio, FCF, cash balance, dividend details, share count) limit full precision, but available figures indicate stable solvency, modest profitability, and near-term cash flow volatility.

Profitability Analysis

ROE_decomposition: ROE 2.34% = Net Profit Margin 0.81% × Asset Turnover 1.017 × Financial Leverage 2.83. This implies ROA ~0.82%, with leverage contributing meaningfully to shareholder returns despite thin margins. margin_quality: Gross margin at 7.6% is consistent with industry norms. Operating margin is ~0.95% (¥7.26bn OI on ¥767.9bn sales), slightly compressed YoY as operating income fell 1.7% despite sales growth. Ordinary margin is ~1.09%, aided by positive non-operating items. Net margin at 0.81% improved YoY alongside net income growth. operating_leverage: Revenue +1.7% YoY vs operating income -1.7% YoY indicates negative operating leverage this half. EBITDA margin of 1.3% underscores limited fixed-cost absorption; better scaling would require stronger gross profit growth and SG&A containment.

Growth Assessment

revenue_sustainability: Top-line growth of 1.7% YoY is consistent with market volume trends and price revisions in Japanese pharma distribution. Sustained growth likely relies on stable hospital/clinic demand and mix (including specialty drugs). profit_quality: Net income rose 16.0% YoY, but the quality is mixed: operating income contracted while ordinary income outpaced operating, suggesting non-operating support. D&A of ¥2.82bn vs EBITDA of ¥10.08bn indicates manageable non-cash charges. outlook: Key forward drivers include upcoming NHI price revisions, competitive pricing, and logistics efficiency. Stabilization or improvement in operating margin will depend on SG&A control and procurement terms; normalization of working capital should relieve OCF pressure in subsequent periods.

Financial Health

liquidity: Current ratio 129.5% and quick ratio 108.1% indicate solid near-term coverage, backed by ¥124.9bn working capital. Cash and equivalents were not disclosed; thus, immediate liquidity buffers cannot be precisely assessed. solvency: Total equity ¥267.0bn vs total assets ¥754.9bn implies an equity ratio of ~35.4% despite the undisclosed metric. Interest coverage ~330x reflects negligible interest burden. Debt-to-equity is 1.75x per provided metric, suggesting moderate leverage typical for a working-capital-intensive distributor. capital_structure: The balance sheet shows a classic distributor profile with large current assets (¥548.9bn) and liabilities (¥424.0bn). Leverage supports ROE but remains conservative given the interest burden.

Cash Flow Quality

earnings_quality: OCF/Net Income at -1.72x indicates weak cash conversion in the half, likely due to inventory build and/or receivable timing rather than earnings deterioration, given stable gross margin and low interest expense. FCF_analysis: Free cash flow cannot be assessed as investing cash flow was not disclosed (reported as zero indicates unavailable). D&A of ¥2.82bn suggests maintenance capex is likely modest relative to OCF over a full year, but confirmation requires disclosed capex. working_capital: Inventories are ¥90.8bn within current assets of ¥548.9bn, consistent with distribution scale. The negative OCF points to a temporary working capital outflow; monitoring inventory days and receivable days will be critical for cash normalization.

Dividend Sustainability

payout_ratio_assessment: Dividend per share and payout ratio are not disclosed in this dataset (zeros signify unreported). EPS is ¥99.12, but without payout data we cannot derive a payout ratio for the half. FCF_coverage: FCF coverage of dividends cannot be evaluated due to missing investing cash flow and undisclosed dividends. On a structural basis, sustainability hinges on full-year OCF generation once working capital normalizes. policy_outlook: Japanese distributors typically pursue stable dividends; absent disclosed figures, we assume a continued emphasis on steady shareholder returns subject to cash flow recovery and capital allocation to logistics IT and distribution hubs.

Risk Assessment

Business Risks:

• NHI drug price revisions compressing gross margins
• Intense competition among major wholesalers pressuring pricing
• Customer consolidation and hospital group bargaining power
• Inventory obsolescence risk for specialty and short-dated products
• Supply chain/logistics disruptions and rising distribution costs
• IT system reliability and cybersecurity in order/fulfillment platforms

Financial Risks:

• Working capital volatility driving negative interim OCF
• Exposure to credit risk from hospital/clinic receivables
• Potential increase in funding costs from higher interest rates (albeit low current interest burden)
• Leverage sensitivity to inventory and receivable cycles (D/E 1.75x)

Key Concerns:

• Negative OCF this half despite positive earnings
• Operating margin contraction amid revenue growth (negative operating leverage)
• Limited disclosure on cash, investing cash flows, and dividend outlays

Investment Implications

Key Takeaways:

• Top-line grew 1.7% YoY; operating income slipped 1.7% YoY, compressing operating margin to ~0.95%
• Ordinary income exceeded operating income by ~¥1.07bn, supporting net profit growth (+16% YoY)
• ROE at 2.34% reflects thin margins offset by asset turnover and moderate leverage
• Liquidity is solid (current ratio 129.5%, quick ratio 108.1%) with implied equity ratio ~35.4%
• Operating cash flow -¥10.7bn signals temporary working capital drag; cash details not disclosed

Metrics to Watch:

• Operating margin and SG&A ratio trajectory
• Working capital metrics: inventory days and receivable days
• OCF recovery and full-year cash conversion
• Ordinary income components (non-operating gains/losses) and sustainability
• Impact of NHI price revisions on gross margin
• Debt-to-equity and interest coverage amid rate environment

Relative Positioning: Within Japan’s Big Four pharma distributors, Toho’s margins and ROE fall within the low range typical for the sector; balance sheet appears conservatively capitalized, while near-term cash conversion lags due to working capital.

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