Towa Pharmaceutical (4553): Impairment of ¥14.7bn at domestic subsidiary

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Towa Pharmaceutical (4553): Impairment of ¥14.7bn at domestic subsidiary

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Towa Pharmaceutical (4553)

Impairment of ¥14.7bn at domestic

subsidiary

Reiterate Rating: BUY | PO: 5,500 JPY | Price: 3,880 JPY

11 May 2026

Negative outcome four years post-acquisition Equity

After the close on the 11th, Towa revised down its FY3/26 guidance, citing weak

performance at its domestic subsidiary Sunsho Pharmaceutical (health supplements, Ritsuo Watanabe >>

Research Analyst

contract capsule-drug manufacturing). Operating profit was lowered from ¥27.0bn to BofAS Japan

¥23.1bn (consensus ¥26.3bn), and net profit from ¥17.7bn to ¥5.2bn. The company ritsuo.watanabe@bofa.com

acquired Sunsho in FY3/22 for ¥47.6bn to secure growth drivers beyond the generics Kei Takeuchi >> Research Analyst

drug (Gx) business; however, weaker-than-expected demand for health supplements and BofAS Japan

intensified competition in contract manufacturing significantly exceeded initial kei.takeuchi@bofa.com

assumptions. While Sunsho’s weakness had been indicated through 3Q results, we view

the impairment recognized in FY3/26 results as unexpected.

Stock Data

GX recovery remains soft after shipment normalization

The breakdown of the ¥6.3bn downward revision to operating profit was not disclosed. Price 3,880 JPY

We estimate Sunsho’s impact at ¥1.0–1.5bn, with the remaining ¥5.0bn attributable to Price Objective 5,500 JPY

revenue shortfall in the core domestic Gx business. For products whose shipment Date Established 3-Apr-2026

restrictions were lifted following capacity expansion and supply normalization, the order Investment Opinion B-1-7

recovery in 4Q appears to have been below expectations. That said, conditions started to 52-Week Range 2,392-4,490 JPY