| Metric | Current Period | Prior Year Period | YoY |
|---|---|---|---|
| Revenue | ¥24866.5B | ¥23999.5B | +3.6% |
| Operating Income | ¥363.7B | ¥371.2B | -2.0% |
| Equity-method Investment Income (Loss) | ¥10.3B | ¥-6.4B | +261.9% |
| Ordinary Income | ¥397.4B | ¥388.3B | +2.4% |
| Net Income | ¥292.4B | ¥257.3B | +13.6% |
| ROE | 7.0% | 6.3% | - |
For the fiscal year ended March 2026, Revenue was 2兆4,866B円 (YoY +¥867B +3.6%), Operating Income was ¥364B (YoY -¥7B -2.0%), Ordinary Income was ¥397B (YoY +¥9B +2.4%), and Net Income was ¥292B (YoY +¥35B +13.6%). Despite higher sales but lower operating profit in core operations, recognition of Special Gains of ¥178B—centered on Investment Securities Disposal Gains of ¥156B—drove double-digit growth in final profit. The Pharmaceutical Wholesaling business remained solid with Revenue +3.8% but continued to exhibit thin margins with Operating Income -1.4%, while the Specialty Pharmaceuticals Distribution Contract business achieved high growth with Revenue +47.6% and Operating Income +36.7%. Gross margin of 7.7% was broadly flat, but increased SG&A lowered the operating margin to 1.5% (-9bp); due to Special Gains, Net Income margin improved to 1.2% (+0.3pt).
[Revenue] Revenue reached 2兆4,866B円 (+3.6%), marking the third consecutive year of top-line growth. The Pharmaceutical Wholesaling business, accounting for 79.4% of sales, grew +3.8%. The Specialty Pharmaceuticals Distribution Contract business expanded rapidly (+¥1,754B, +47.6%), driving companywide growth. Regional Medical & Long-term Care Support was slightly down -0.5%, and Healthcare Product Development was sluggish at -1.9%, while Medical-related Services and other businesses grew +1.8% and remained stable. Of sales to external customers, prescription pharmaceuticals were ¥23,494B (prior year ¥20,425B) as the core, and other segments amounted to ¥1,373B (prior year ¥3,574B).
[Profitability] Cost of sales was ¥22,941B, yielding gross profit of ¥1,925B (gross margin 7.7%, down -0.3pt from 8.0% prior). SG&A was ¥1,561B (SG&A ratio 6.3%), resulting in Operating Income of ¥364B (Operating margin 1.5%, broadly flat from 1.5% prior). Non-operating income was ¥38B—comprised of dividend income of ¥15B and equity-method investment gains of ¥10B—bringing Ordinary Income to ¥397B (+2.4%). Recognition of Special Gains of ¥178B (Investment Securities Disposal Gains ¥156B, Gain on Sale of Subsidiary Shares ¥19B) lifted Profit before Tax to ¥543B; after income taxes of ¥162B, Net Income was ¥292B (+13.6%), achieving double-digit growth. Excluding special items, on an ordinary basis the company had operating decline (-2.0%) but ordinary income growth (+2.4%); thus, the rise in final profit is largely due to one-off items. Conclusion: revenue up / operating profit down (on operating basis), revenue up / net profit up (driven by Special Gains).
Pharmaceutical Wholesaling: Revenue ¥24,010B (+3.8%), Operating Income ¥315B (-1.4%), Margin 1.3%. As the core segment accounting for 87% of company operating income, price negotiations and distribution efficiency efforts have left margins thin; despite higher sales, increased SG&A caused lower profit. Specialty Pharmaceuticals Distribution Contract: Revenue ¥4,361B (+47.6%), Operating Income ¥12B (+36.7%), Margin 0.3%. Rapid growth driven by expanded manufacturer support services, but low profitability limits contribution. Regional Medical & Long-term Care Support: Revenue ¥939B (-0.5%), Operating Income ¥15B (+20.0%), Margin 1.6%. Sales were flat but efficiency gains improved margin. Healthcare Product Development: Revenue ¥516B (-1.9%), Operating Income ¥8B (-56.7%), Margin 1.6%. Higher R&D and manufacturing costs drove a significant decline in profit. Medical-related Services and Others: Revenue ¥430B (+1.8%), Operating Income ¥13B (+21.6%), Margin 3.0%. Relatively high-margin and maintained stable growth.
[Profitability] Operating margin was 1.5% (prior 1.5%), broadly flat; gross margin 7.7% (prior 8.0%) less SG&A ratio 6.3% indicates a continued thin-margin structure. Net profit margin improved to 1.2% (prior 1.1%) due to Special Gains (+0.1pt), though recurring earning power is limited. ROE improved to 7.0% (prior 6.3%), and ROA (on Ordinary Income basis) rose slightly to 3.5% (prior 3.3%). EBITDA margin was 2.0% (Operating Income ¥364B + Depreciation ¥123B = ¥487B / Revenue), remaining low and reflecting low capital intensity. [Cash Quality] Operating Cash Flow was ¥336B, 1.15x Net Income (¥292B), a healthy turnaround from prior operating CF of -¥651B. Cash conversion cycle: Days Sales Outstanding 81 days (Accounts Receivable ¥5,542B / annual sales), Inventory days 21 days, Days Payable Outstanding 106 days; net working capital days -4 days, indicating long payable terms and favorable liquidity. Operating CF / EBITDA ratio was 0.69x, relatively low and affected by working capital changes (Accounts Receivable +¥300B, Accounts Payable +¥300B). [Investment Efficiency] Total asset turnover was 2.15x (Revenue ¥2兆4,866B / Average Total Assets ¥1兆1,348B), indicating high efficiency. CapEx was ¥151B, 1.22x depreciation ¥123B, exceeding maintenance and supporting growth investment. Intangible assets ¥157B (1.4% of total assets), goodwill ¥35B (0.3%) are modest; impairment risk is limited. [Financial Soundness] Equity Ratio 36.0% (prior 36.6%) at a stable level; current ratio 122.9%, quick ratio 102.5%—short-term liquidity secured. Interest-bearing debt is effectively zero (interest paid ¥0.4B only); cash and deposits ¥1,167B, short-term investment securities ¥250B, investment securities ¥792B provide ample liquid assets. Interest coverage (Operating CF ¥336B / interest paid ¥0.4B) = 866x, indicating minimal interest burden and very high financial flexibility.
Operating CF was ¥336B, improving ¥987B from prior -¥651B and turning positive. Pre-working-capital subtotal of operating CF was ¥499B (+¥53B), with Accounts Receivable increase -¥300B and Accounts Payable increase +¥300B offsetting each other; Inventory decrease +¥6B provided a small positive contribution. After corporate tax payments of ¥168B, net operating CF was ¥336B. Investing CF was a net inflow of ¥128B, as Investment Securities sales/redemptions +¥210B (short-term investment securities sales +¥21B, sale of subsidiary shares +¥21B, etc.) more than offset CapEx -¥151B. Free Cash Flow was ¥464B (Operating CF ¥336B + Investing CF ¥128B), ample and fully covered financing CF outflows of -¥333B (dividend payments -¥71B, share buybacks -¥260B, lease liabilities repayment -¥3B). Cash and cash equivalents increased by ¥130B from opening ¥1,186B to closing ¥1,316B, indicating solid liquidity. Operating CF / Net Income was 1.15x, indicating healthy cash realization of profits; FCF / Operating CF was 1.38x, showing strong investment recovery. However, Operating CF / EBITDA at 0.69x and working capital expansion (Accounts Receivable increase) constrain cash conversion and present room for improvement.
Against Ordinary Income of ¥397B, Special Gains of ¥178B (Investment Securities Disposal Gains ¥156B, Gain on Sale of Subsidiary Shares ¥19B) were recognized, significantly contributing to Net Income growth to ¥292B. Non-operating income of ¥38B is small relative to revenue (0.15%), primarily dividend income ¥15B and equity-method investment income ¥10B, representing recurring income sources. Non-operating expenses were minimal at ¥5B (including interest paid ¥0.4B), so financing cost burden is nearly zero. Special Losses amounted to ¥32B (Investment Securities Valuation Losses ¥21B, Impairment Losses ¥7B, etc.), and net of special items the impact was +¥146B of profit uplift. The gap between Ordinary Income and Net Income was ¥146B (approx. +37%) due to Special Gains, so reversal of these items next year could cause a decline in final profit. Operating CF ¥336B / Net Income ¥292B = 1.15x, supporting cash backing; accrual ratio (Net Income - Operating CF) / Total Assets = -0.4%, showing negative accruals and no signs of excessive accounting manipulation. Comprehensive income was ¥413B, ¥121B higher than Net Income; Other Comprehensive Income was driven by Unrealized Gains (Losses) on Other Securities -¥2B, Remeasurements of Defined Benefit Plans +¥31B, and OCI attributable to equity-method affiliates +¥3B. The divergence between Net Income and Comprehensive Income is small; earnings quality is generally sound, but reliance on one-off items for Net Income growth warrants caution.
Full-year guidance: Revenue ¥2兆5,630B (+3.1%), Operating Income ¥312B (-14.2%), Ordinary Income ¥343B (-13.7%), Net Income ¥250B (-14.5%). This conservative guidance incorporates the fall-off of current-period Special Gains and margin pressure. Progress rate (H1 / Full-year guidance) is Revenue 97.0%, Operating Income 117%, Ordinary Income 116%, Net Income 117%—H1 results exceed full-year guidance, implying upside potential for revisions. Assuming headwinds such as drug price revisions and rising logistics costs, continued high growth in Specialty Distribution Contracts and stable earnings from Medical-related Services are expected to provide downside support. Dividend guidance is annual ¥60 (Year-end ¥60, post-split basis); pre-split equivalent is annual ¥120 (Interim ¥50 + Year-end ¥60 equivalent), with payout ratio around 32%, maintaining an appropriate level.
Annual dividend is ¥100 (Interim ¥50 + Year-end ¥50), with payout ratio 18.9% (Total dividends ¥71B / Net Income ¥292B × adjusted average shares outstanding) at a conservative level. Total dividends are approximately ¥71B, only 15.3% of FCF ¥464B, and FCF coverage is 6.43x, indicating ample capacity. Share buybacks of ¥260B were executed, acquiring ~4.53M shares, equivalent to 6.3% of outstanding shares. Dividends ¥71B + share buybacks ¥260B = total returns ¥331B, representing a total return ratio of ~113% relative to Net Income ¥292B, but 71% relative to FCF ¥464B—within a healthy range. A 1:2 stock split is scheduled effective October 1, and the year-end dividend forecast of ¥60 (post-split) corresponds to an annual ¥120 pre-split equivalent, indicating a de facto increase in dividends. With cash ¥1,167B and investment securities ¥792B and virtually zero interest-bearing debt, the company has sufficient capacity to continue dividends and share repurchases.
Dependence on working capital and vulnerability of cash conversion: Large working-capital structure (Accounts Receivable ¥5,542B, DSO 81 days; Accounts Payable ¥6,658B, DPO 106 days) creates dependence and results in low cash conversion (Operating CF / EBITDA 0.69x). Continued expansion of receivables with revenue growth could pressure cash flow and enlarge the balance sheet. If drug price revisions or changes in customer payment terms lengthen collection periods, liquidity risk could increase.
Thin-margin structure and low operating leverage: With Operating margin 1.5% and gross margin 7.7%, SG&A ratio 6.3% absorbs most gross profit; this structure is becoming entrenched. Despite Revenue +3.6%, Operating Income -2.0% shows weak operating leverage. Inflationary pressures on logistics and labor could structurally compress profits. The Specialty Distribution Contract business is high-growth but has a 0.3% margin; if medium-term margin improvement is delayed, lifting companywide profitability will be difficult.
Dependence on Special Gains and sustainability of Net Income: This period’s Net Income growth was heavily driven by Special Gains ¥178B (Investment Securities Disposal Gains ¥156B, etc.), and next-year forecasts assume a significant decline in Net Income (-14.5%). Improvement in recurring earnings (Ordinary Income ¥397B, Operating Income ¥364B) is limited; sustainable Net Income growth requires recovery of core margins, which is challenging under drug price revisions and intensified competition. Investment securities ¥792B remain subject to valuation volatility, limiting the scope for realizing gains.
Profitability & Returns
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Operating Margin | 1.5% | 3.4% (1.4%–5.0%) | -1.9pt |
| Net Profit Margin | 1.2% | 2.3% (1.0%–4.6%) | -1.1pt |
Profitability lags the industry median, reflecting thin-margin structure in pharmaceutical wholesaling and SG&A burden below industry average.
Growth & Capital Efficiency
| Metric | Company | Median (IQR) | Delta |
|---|---|---|---|
| Revenue Growth Rate (YoY) | 3.6% | 5.9% (0.4%–10.7%) | -2.2pt |
Revenue growth trails the industry median by 2.2pt; despite high growth in Specialty Distribution, the company ranks below median on a consolidated basis.
※ Source: Company compilation
Core earning power after fall-off of Special Gains: This period’s Net Income +13.6% was largely due to Investment Securities Disposal Gains ¥156B; next-year guidance assumes Operating Income -14.2% and Net Income -14.5%, revealing the thin-margin core business. Operating margin 1.5% is -1.9pt below industry median 3.4%; SG&A efficiency, margin improvement in Specialty Distribution, and expansion of Medical-related Services to lift margins are mid-term priorities.
Working-capital efficiency and cash conversion improvement potential: Operating CF / EBITDA 0.69x and DSO 81 days indicate weak cash conversion; shortening collection periods and strengthening cash generation amid rising Accounts Receivable ¥5,542B are critical. While DPO 106 days (Accounts Payable ¥6,658B) provides relative stability, changes in supplier terms warrant attention. FCF ¥464B is plentiful and comfortably covers share buybacks ¥260B and dividends ¥71B, but sustained cash generation depends on working-capital efficiency.
Expansion of Specialty Distribution and structural shift potential: Specialty Pharmaceuticals Distribution Contract business saw Revenue +47.6% and Operating Income +36.7%, but margin is only 0.3%. Its share of sales expanded to 17.5% (prior 12.4%), and over the medium term mix improvement and margin uplift could support companywide margin improvement. Conversely, the entrenched thin-margin structure of Pharmaceutical Wholesaling (79.4% of sales, margin 1.3%) means the pace of portfolio shift and feasibility of margin improvement will be pivotal for equity valuation.
This report is an AI-generated earnings analysis document automatically produced by analyzing XBRL financial statement data. It does not constitute a recommendation to invest in any particular security. Industry benchmarks are reference information compiled by the company based on public financial statements. Investment decisions are your own responsibility; consult a professional advisor as appropriate.