TSUMURA & CO.

Business Details

In the domestic business, the company manufactures and sells Prescription Kampo Formulations (129 Formulations) and Healthcare Products (OTC Kampo Formulations, etc.), while the China business engages in the procurement, processing, and sale of raw crude drugs and Yinpian (chopped crude drugs). Major customers are pharmaceutical wholesalers (Alfresa Holdings, Medipal Holdings, Suzuken, and Toho Holdings), with the top four accounting for approximately 70% of domestic sales. The entire Kampo value chain is vertically integrated within the group, managed consistently from crude drug cultivation through formulation manufacturing and information provision activities. In FY2026 (ending March 2026), the China business expanded rapidly, up 52.4%, while the domestic business saw shipments fall below the prior period due to inventory adjustments related to infectious disease-related formulations, among other factors, resulting in a 12.2% decline in operating profit.

Recent Overview

China business expanded rapidly, up 52%, but operating profit fell 12% due to domestic inventory adjustments and rising costs

In FY2026 (ending March 2026), the company achieved net sales of ¥192,615 million (up 6.4% year on year), but operating profit came in at only ¥35,219 million (down 12.2% year on year). In the domestic business, elevated distribution inventory levels at the end of the third quarter due to the early resolution of infectious disease outbreaks, combined with a year-on-year decline in actual sales of infectious disease-related formulations in the fourth quarter, pushed down shipments. The China business expanded rapidly to ¥31,442 million (up 52.4% year on year), driven by the consolidation of Shanghai Hongqiao Chinese Medicine Yinpian Co., Ltd. (acquisition cost of ¥23,837 million, 51% equity stake) and expanded Yinpian sales. The cost of sales ratio rose 2.5 percentage points to 52.5%, due to the strategic buildup of domestic raw crude drug inventory and the impact of the Hongqiao Yinpian consolidation, while SG&A expenses also increased 11.6%. On April 11, 2025, restricted shipment status was fully lifted for all 129 Prescription Kampo Formulations. For FY2027 (ending March 2027), the company forecasts net sales of ¥213,600 million (up 10.9%) and operating profit of ¥37,500 million (up 6.5%). The annual dividend was ¥147 (maintaining a DOE of 3.6%), with the forecast for the next fiscal year at ¥158.

Key Products

Growth Drivers

• Expansion of actual sales volume for formulations related to edema, headache, dizziness, anxiety, and insomnia through hybrid information provision activities combining e-promotion and MR activities (actual sales up 2.0% year on year in FY2026, ending March 2026)
• Recovery of a stable supply system and capture of demand through the full lifting of restricted shipment status for all 129 Prescription Kampo Formulations (April 11, 2025)
• Consolidation of Shanghai Hongqiao Chinese Medicine Yinpian Co., Ltd. in the China business (full-year contribution in FY2027, ending March 2027) and expansion of raw crude drug and Yinpian sales (China business sales forecast of ¥46,000 million in FY2027, ending March 2027)
• Growth in the OTC market through expansion of retail outlets carrying domestic Healthcare Products (OTC Kampo Formulations, etc.) (up 17.4% to ¥6,206 million in FY2026, ending March 2026)
• Expansion of Growing formulations (Goreisan, Kamishoyosan, Kamikihito, etc.) through evidence building and promotion of inclusion in clinical practice guidelines (Growing formulations total ¥25,346 million in FY2026, ending March 2026, up 4.0% year on year)
• Strengthening future supply capacity through aggressive capital investment aimed at increasing production capacity and productivity (acquisition of property, plant and equipment of ¥32,780 million in FY2026, ending March 2026)

Risks

• Drug price revision risk: impact on earnings from biennial drug price revisions (downward pressure on drug prices from revisions from FY2026, ending March 2026, onward)
• Rising raw crude drug procurement costs: temporary cost increases from the strategic buildup of raw crude drug inventory in Japan (2.5 percentage point rise in cost of sales ratio) and persistently high procurement costs due to exchange rate fluctuations and inflation
• Increased costs associated with China business expansion: increased burden of amortization and goodwill (¥8,768 million, amortized evenly over 20 years) and customer-related assets (¥21,011 million, weighted average of 25.5 years) from the Hongqiao Yinpian consolidation, pressuring profit
• Uncertainty in infectious disease outbreak patterns: risk that fluctuations in demand for infectious disease-related formulations affect distribution inventory levels, reducing the accuracy of shipment planning (materialized in FY2026, ending March 2026)
• Risk of sales concentration with major pharmaceutical wholesalers: the top four companies (Alfresa Holdings, Medipal Holdings, Suzuken, and Toho Holdings) account for approximately 70% of net sales
• Risk to stable procurement of raw crude drugs: impact of climate change and geopolitical risk on the quality and supply volume of crude drugs
• Geopolitical and regulatory risk in the China business: risk that changes in business regulations and political risk in China affect the China business (approximately 16% of net sales)
• Decline in equity ratio: significant increase in long-term borrowings (from ¥20,051 million to ¥77,454 million) has lowered the equity ratio from 64.7% to 54.3%, raising financial leverage