The average target price of 4553.T is 3971 and suggests 28% 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 4400.0. This translates into 42% upside potential in the best case. On the other hand, the most pessimistic analyst has a target price of 3200.0. This suggests 3% 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 pays dividends on rare occasions. There have only been a few years with dividend payments in 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. At the same time, the average five-year yield has been significantly lower, at almost zero. 

4553.T reported revenue of JPY 259 594mn in the last 12 months, up 2% from FY24. At the same time, the dynamics of cash flow, as measured by free cash flow (FCF), were drastically different. EPS fell 2% from FY24 to JPY 385.70. Market expects EPS to reach JPY 318.31 in FY25.

The stock has been growing steadily in the past six months, adding 12% in total. The stock has outperformed its global peers from the same sector and industry (as shown above), surpassing them by 21ppts in total. 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 'fair'.

The company has reported average EBITDA margins compared to its global peers in recent years. EBITDA margin amounted to 16.1% in the last 12 months, up from 15.7% in FY24. 

Historically, 4553.T has reported average net margins compared to its global peers. Specifically, in the last 12 months, this metric equalled 7.3%, down from 7.6% in FY24. 

Another important profitability metric, return on assets (RoA), amounted to 4.1% in the last 12 months, a decrease from 4.4% in FY24. The market analysts predict that RoA will be 5.2% in FY25, again weaker than its peers. 

In the last 12 months, the return on capital employed (RoCE) declined to 5.0%, below the peers. The consensus estimate for FY25 for RoCE is 6.6%, again behind the peers. 

Towa Pharmaceutical Co., Ltd. reported a return on equity (RoE) of 11.1% in the last 12 months, down from 12.1% in FY24. The market consensus projects an RoE of 14.1% in FY25, 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 above 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. 

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, weak debt servicing capacity, and an unfavourable capital structure. We note adequate interest coverage, among the positive credit factors. 

In highly turbulent market conditions, 4553.T is not volatile. In other words, the stock will fall far 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 very low. 

In normal market circumstances, 4553.T is not volatile. Put differently, without outstanding market volatility or shocking company news, the stock's price will stay within a narrow range. 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. Specifically, the stock is 'cheap' on P/E, neutral on EV/EBITD. 

Towa Pharmaceutical Co., Ltd.

¥ 3135

6

Towa Pharmaceutical Co., Ltd.

¥ 3135

6

Risk factor

Profitability factor

Risk / Profitability

Risk factor

Profitability factor

¥ 3135

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