Summary: RIZAP Group<2928>The comprehensive enterprise, which is committed to proving that "people can change" as its unique management philosophy, develops a variety of businesses in the three areas of health creation, health care / beauty, lifestyle, and investment. Under the vision of "Global No.1 in the self-investment industry", it has achieved remarkable growth by actively utilizing M&A under the holding company structure and has grown to include 68 group companies, including 5 listed subsidiaries, and 4,606 consolidated employees. Listed on the Sapporo Stock Exchange's Ambitious Market in 2006, it formulated a medium-term management plan in September 2022, but revised it in February 2024 to achieve an operating profit of ¥400 million (fiscal year ending March 2027) by aggressively expanding the new business "chocoZAP". The fiscal 2024 performance was sales revenue of ¥16,629.8 million (+7.6% YoY), operating loss of ¥594 million (compared to a loss of ¥4948 million in the same period of the previous year), pre-tax loss of ¥4524 million (compared to a loss of ¥7,031 million in the same period of the previous year), and net loss attributable to the owners of the parent of ¥4,300 million (compared to a loss of ¥12,673 million in the same period of the previous year). Due to the black ink conversion of the chocoZAP business, it achieved a black ink of ¥417.5 million on an operating profit basis in the fourth quarter alone. As for sales revenue, the RIZAP-related business (including the chocoZAP business) significantly increased its revenue (+¥201 million) by focusing on expanding the convenience gym "chocoZAP". In existing businesses, there was an increase in revenue, including Antiroza Co., Ltd. (+¥419.8 million), while there was a decrease in revenue due to store structure reform in REXT Co., Ltd., etc. (-¥599.8 million) and the impact of selling the Sikata business under the subsidiary BRUNO<3140>at the end of the previous year (-¥511.1 million). As for operating loss, the group as a whole improved due to the transition of the chocoZAP business to the investment recovery period and the success of business portfolio reform such as REXT.

Core Corporation Holdings <9273> is a holding company of a group engaged in the import and sale of pharmaceutical raw materials and the manufacturing and selling of pharmaceutical products listed on the Tokyo Stock Exchange (TSE) Prime Market. It started with the import and sale of generic pharmaceutical raw materials (raw material segment) and now focuses on the manufacturing and selling of pharmaceutical products mainly injectables, as well as contract manufacturing of pharmaceutical products (pharmaceutical segment). It aims to continue its growth through the steady promotion of medium- to long-term business plans.

1. Overview of Performance for the Year Ending June 2024

For the consolidated performance in the fiscal year ending June 2024, the operating income increased by 0.4% year-on-year to 22,134 million yen, the operating profit increased by 3.1% to 4,382 million yen, the ordinary profit increased by 6.7% to 4,368 million yen, and the net income attributable to parent company shareholders increased by 9.6% to 2,946 million yen, achieving both revenue and profit growth. As a result, the operating margin improved to 19.8%, an increase of 0.5 percentage points compared to the plan announced at the end of June 2023. Although revenue fell by 3.7% below the plan, operating profit and ordinary profit were generally in line with the plan, and the net income attributable to parent company shareholders exceeded the plan by 6.4%. The decrease in revenue below plan was due to the reduced revenue in the raw material segment. The increase in net income attributable to parent company shareholders exceeding the plan was due to the exclusion of tax on reserve funds resulting from the public offering of new shares in June 2024, reducing the tax burden. In terms of segments, while the raw material segment experienced a decrease in revenue due to inventory adjustments resulting from changes in customers' policies, a decrease in sales volume from customers due to administrative measures, and a decrease in order volume due to the adoption of competing raw materials, it secured a slight gain from the increase in sales of new products with high profit margins. On the other hand, in the pharmaceutical segment, revenue increased due to the significant increase in sales quantity of the main injectable products through increased production, and some existing products performed well due to alternative demand resulting from other companies' product discontinuation, achieving a profit increase of over 10% due to increased production volume and improved productivity. The equity ratio is 78.3%, ROA is 14.4%, and ROE is 12.8%, all exceeding the average of all industries listed on the Prime Market in March 2024, demonstrating high safety and profitability. Reflecting the strong financial results, the year-end dividends per share increased by 1.0 yen compared to the previous year to 13.0 yen, continuing the trend of dividend growth. The shareholder benefit program is also ongoing, and the management stance of continuing growth investments while also considering shareholder returns is commendable.

2. Outlook for the Year Ending June 2025

For the consolidated performance in the fiscal year ending June 2025, the company forecasts an increase in revenue by 5.5% to 23,350 million yen compared to the previous year, an increase in operating profit by 5.4% to 4,620 million yen, an increase in ordinary profit by 5.3% to 4,600 million yen, and an increase in net income attributable to parent company shareholders by 4.5% to 3,080 million yen, expecting both revenue and profit growth. However, it anticipates a conservative performance forecast, expecting the operating profit margin to remain at the same level as the previous year, 19.8%. By segment, the raw material segment expects a slight increase in revenue and profit due to the increase in new adopted products and the expansion of sales channels for existing products. The pharmaceutical segment expects revenue and profit growth to surpass the raw material segment by securing sales and profits through increased production of main products and fully launching subcontracting business at the Zao Factory. The company plans to change its dividend policy to "generally increase dividends every year" in the future, with a planned year-end dividend per share of 14.0 yen for the fiscal year ending June 2025, an increase of 1.0 yen from the previous year. It will continue to carry out facility investments following its medium- to long-term growth strategy, maintaining its policy of achieving revenue and profit growth and giving sufficient consideration to shareholder returns.

3. Medium- to Long-term Business Plan

The company formulated a long-term business plan in 2020, publicly announced a sustainable growth strategy, and has been promoting a 10-year long-term business plan. With the decision to invest in facilities at the second Zao Factory in April 2024, the company has been able to gain some visibility into future business operations. Therefore, it publicly announced new financial targets for the long-term business plan aiming for sales of 40,000 million yen and operating income of 8,000 million yen by the fiscal year ending June 2030. From the fiscal year ending June 2025 onwards, the company anticipates an ambitious growth rate of over 10% annually for both sales and operating income. To achieve the plan, it aims for the operating profit of both segments to be of a similar scale by expanding the revenue base of the raw material segment and growing the pharmaceutical segment, which is a growth driver. In the upcoming 3-year medium-term business plan, the company will promote activities such as accelerating new adoption efforts targeting new products, long-term adoption products, expansion of market share for existing products, and strengthening relationships with overseas suppliers in the raw material segment. Additionally, in the pharmaceutical segment, it will advance the strategy of proposal-based contract business and fully expand subcontracting business at the Zao Factory. Alongside advancing the medium- to long-term business plan, the company also plans to focus sufficiently on sustainability activities. It will be important to monitor the progress of the medium- to long-term business plan in the future.

■Key Points

・In the June 2024 period, there was a slight increase in revenue and profit. The raw material segment fell below expectations, but the pharmaceutical segment covered it. They take pride in their strong financial health and are implementing an increase in dividends.

・An increase in revenue and profit is also expected for the June 2025 period. Both the raw material segment and the pharmaceutical segment are planning for increased revenue and profit. They are planning for steady dividend increases based on a new dividend policy.

・In the long-term business plan, they have announced new financial goals for the June 2030 period. In addition to the revenue foundation of the raw material segment, they are planning to expand the pharmaceutical segment, which is a growth driver. To achieve their goals, they will promote a 3-year medium-term business plan in the future.

(Written by FISCO guest analyst Nozomi Kokushige).