6523: Earnings Upside Will Emerge From Improved Margins Despite Segment Weakness

Analysts have modestly raised their price target on PHC Holdings to approximately ¥1,244 from about ¥1,223, citing slightly faster expected revenue growth, improved profit margins, and a lower discount rate, despite a marginally reduced future P/E multiple.

What's in the News

• PHC Holdings lowered its consolidated earnings guidance for the fiscal year ending March 31, 2026, cutting profit and EPS forecasts while keeping revenue unchanged at JPY 363.1 billion (Key Developments).
• The company now expects operating profit of JPY 20.0 billion, up from the prior JPY 17.4 billion, driven by stronger performance in Diabetes Management and HQ and Others despite weaker segments elsewhere (Key Developments).
• Profit attributable to owners of parent was revised down to JPY 4.5 billion and EPS to JPY 34.80, mainly due to JPY 6.8 billion in foreign exchange losses recorded in the first half and higher assumed exchange rates for the euro and US dollar (Key Developments).
• Within segments, Diabetes Management guidance was revised upward on strong BGM business and the expected deconsolidation of the CGM business. Healthcare Solutions and Diagnostics & Life Sciences were revised downward on softer CRO demand and continued weak equipment demand after subsidy reductions in the U.S. (Key Developments).
• The transfer of the CGM business remains under negotiation. Management has confirmed no goodwill impairment in the Diabetes Management segment at this stage after conducting an impairment test (Key Developments).

Valuation Changes

• The Fair Value Estimate has risen slightly to approximately ¥1,244 from around ¥1,223, reflecting modestly improved fundamentals.
• The Discount Rate has fallen slightly to about 9.86 percent from roughly 10.25 percent, which increases the present value of projected cash flows.
• The Revenue Growth Assumption has edged up to about 2.13 percent from roughly 2.02 percent, indicating a marginally stronger outlook for the top line.
• The Net Profit Margin Assumption has improved slightly to about 4.73 percent from around 4.66 percent, supported by expected operational efficiencies.
• The Future P/E Multiple has declined marginally to roughly 11.51x from about 11.65x, which partially offsets the positive impact of the other valuation drivers.