The average target price of 4553.T is 4127 and suggests 47% upside potential. Usually, this means a BUY recommendation among investment firms, or a recommendation to increase one's position in this instrument in the next 12 months. The most optimistic analyst has a target price of 4600.0. This translates into 64% upside potential in the best case. On the other hand, the most pessimistic analyst has a target price of 3000.0. This suggests 7% upside potential. Even the most pessimistic analyst believes there will be stock growth. 

Towa Pharmaceutical Co., Ltd., together with its subsidiaries, researches, develops, produces, and sells ethical drugs, active pharmaceutical ingredients, and intermediates in Japan. The company provides its products in the therapeutic areas of diabetes, digestive system, nervous system, and allergic diseases, as well as vitamins, antibiotics, and oncology products. It had a portfolio of approximately 700 drug products. Towa Pharmaceutical Co., Ltd. was founded in 1951 and is headquartered in Osaka, Japan.

Japan

Towa Pharmaceutical Co., Ltd.

Healthcare

The company has a track record of regular dividend payments. It has paid dividends in each of the past ten years. Dividend per share (DPS) has grown yearly, but the dynamics are unclear. In the past 12 months, the dividend yield has been good and slightly above its peers. On average, the company pays dividends twice a year. 

4553.T reported revenue of JPY 253 346mn in the last 12 months, up 7% from FY23. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS grew 64% from FY23 to JPY 391.67. Market expects EPS to reach JPY 258.32 in FY25.

The stock's performance has been mixed in the past six months, with growth following a decline. There is no clear price trend compared to its global peers from the same sector and industry (as shown above). The stock has outperformed this peer group by 9ppts over past six months and grown 7ppts faster in the past month. This is largely true for peers from the same country and sector. With respect to the stock's valuation against its peers, its overall price performance is neutral.

The company has reported average EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 15.7% in the last 12 months, a decline from 16.4% in FY23. 

Historically, 4553.T has reported average net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 7.6%, a growth from 5.0% in FY23. 

Another important profitability metric, return on assets (RoA), amounted to 4.4% in the last 12 months, an increase from 3.0% in FY23. The market analysts predict that RoA will be 5.8% in FY24, again weaker than its peers. 

In the last 12 months, the return on capital employed (RoCE) grew to 5.4%, below the peers. The consensus estimate for FY24 for RoCE is 11.0%, again behind the peers. 

Towa Pharmaceutical Co., Ltd. reported a return on equity (RoE) of 12.1% in the last 12 months, up from 8.2% in FY23. The market consensus projects an RoE of 17.2% in FY24, again behind its peers. 

The ratio of return on invested capital (RoIC) to the weighted average cost of capital (WACC) has been 1.8 in the past several years. This ratio implies a good shareholder value creation. 

The institutional, legal, and compliance risks associated with the company's country are minimal. In combination with stringent business standards, shareholder rights are very highly protected.

4553.T has average trading liquidity. The average private investor can sell his common position in the stock in a single trading day. Liquidity is usually quite stable and is somewhat unfavourable on the days with the lowest activity. The trading volume mostly stays the same even under highly turbulent market conditions. The stock has a small market capitalisation, which usually makes its trading liquidity erratic and unpredictable. 

No other major risks have been identified.

The risk of default is high. Among the negative credit factors, we point to weak positions in its industry, poor working capital management, and weak debt servicing capacity. We note adequate interest coverage, among the positive credit factors. 

In highly turbulent market conditions, 4553.T is not overly volatile. In other words, the stock will fall less than the index in times of extreme market volatility or shocking company news. Standalone, the worst-day losses (less than 1% of the time) will likely be low. 

In normal market circumstances, 4553.T is not overly volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will remain relatively stable. The stock's losses on its worst days (less than 1-5% of the time) will range from very low to negligible. 

Based on key historical and expected multiples, the stock is greatly undervalued relative to its peers. In particular, the stock is underpriced on P/E, of fair value on EV/EBITD. 

Towa Pharmaceutical Co., Ltd.

¥ 2969

6

Towa Pharmaceutical Co., Ltd.

¥ 2969

6

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

¥ 2969

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