Towa Pharmaceutical Co (4553) AI Stock Analysis

• Market Cap: ¥217.04B
• Dividend Yield: 2.14%
• Average Volume (3M): 112.31K
• Price to Earnings (P/E): 10.1
• Beta (1Y): 0.65
• Revenue Growth: 9.32%
• EPS Growth: 30.85%
• Country: JP
• Employees: 4,588
• Sector: Healthcare
• Sector Strength: 45
• Industry: Drug Manufacturers - Specialty & Generic
• EPS (TTM): 180.15
• Shares Outstanding: 51,516,000
• 10 Day Avg. Volume: 138,760
• 30 Day Avg. Volume: 112,306
• PEG Ratio: 0.40
• Price to Book (P/B): 0.77
• Price to Sales (P/S): 0.51
• P/FCF Ratio: -24.72
• Enterprise Value/Market Cap: N/A
• Enterprise Value/Revenue: N/A
• Enterprise Value/Gross Profit: N/A
• Enterprise Value/Ebitda: N/A
• 1Y Price Target: N/A
• Price Target Upside: N/A
• Rating Consensus: N/A
• Number of Analyst Covering: 0
• EPS Forecast (FY): 382.65
• Revenue Forecast (FY): ¥278.75B

• Rating: 67 Neutral
• Price Target: ¥4,373.00 ▲(20.80% Upside)
• Action: Downgraded Date: 02/18/26
• Date: Action: Downgraded 02/18/26

The score is driven primarily by mixed fundamentals: a clear earnings recovery and revenue growth, but constrained by elevated leverage and weak, inconsistent free-cash-flow generation. Valuation is supportive with a low P/E, while technicals are bullish but appear overbought, adding near-term pullback risk.

Positive Factors

Revenue Growth

Sustained top-line growth indicates continued demand for the company’s generic portfolio and effective product launches. For the next 2–6 months, higher recurring sales improve revenue visibility, support scale advantages in manufacturing, and underwrite operating leverage if sustained.

Margin Recovery

A material rebound in operating and net margins shows improved cost control and pricing execution. This lift restores profitability resilience, improves cash generation potential if maintained, and supports returns on capital over the medium term versus the 2023 trough.

In-house Manufacturing

Owning manufacturing and regulatory capabilities provides durable advantages in supply reliability, speed-to-market for generics, and cost control. These in-house functions help sustain margins and reduce third-party dependency across multiple therapeutic areas.

Negative Factors

High Leverage

Elevated leverage constrains financial flexibility and increases interest and refinancing risk. With substantial outstanding debt relative to equity, the company may face limited capacity to invest or absorb shocks, making deleveraging a multi-quarter structural task.

Weak Cash Conversion

Inconsistent conversion of earnings to free cash flow weakens the company’s ability to retire debt, fund capex, or increase shareholder returns. Modest FCF amid past negative years heightens risk that earnings gains won't quickly translate into durable financial flexibility.

Structural Margin Pressure

A persistent step-down in gross margin versus earlier years suggests ongoing pricing or cost-pressure in the generics market. Structural margin compression limits long-term operating leverage and caps potential returns even if revenue and volumes grow.

Towa Pharmaceutical Co Business Overview & Revenue Model

Company Description

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.

How the Company Makes Money

Towa Pharmaceutical generates revenue primarily through the sale of generic drugs and ethical pharmaceuticals. Its revenue model is largely based on producing high-quality, cost-effective medications that cater to the needs of healthcare providers and patients. Key revenue streams include the sale of prescription medications, which account for a significant portion of its earnings. Additionally, Towa collaborates with healthcare organizations and other pharmaceutical companies for product development and distribution, which can lead to licensing agreements and joint ventures that further enhance its revenue. The company's focus on R&D allows it to expand its product portfolio, thereby increasing market share and driving sales growth. Factors contributing to its earnings include the rising demand for generic medications, strategic partnerships, and an emphasis on innovation in pharmaceutical formulations.

Towa Pharmaceutical Co Financial Statement Overview

Summary

Income statement strength (revenue growth and a material margin rebound) is offset by elevated leverage (debt-to-equity ~1.31) and weak/uneven cash conversion, with only modest free cash flow (~¥6.3B TTM) and several recent years of negative FCF.

Income Statement

TTM (Trailing-Twelve-Months) revenue is up strongly versus the prior annual period (¥269.9B vs ¥259.6B), and profitability has improved materially from the 2023 trough: net margin rebounded to ~7.7% TTM from ~1.1% (2023), while operating profitability is back to ~11.1% TTM. Gross margin is steady in the mid‑30% range recently, but remains below the low‑40% level seen in 2021–2022, indicating some structural margin pressure versus earlier years.

Balance Sheet

The balance sheet shows meaningful leverage: debt is ~¥233.7B TTM against equity of ~¥189.7B (debt-to-equity ~1.31), higher than 2021 levels and generally elevated for financial flexibility. Total assets have grown, and returns on equity have recovered to ~11.9% TTM (from ~1.6% in 2023), but the combination of increased borrowing and only moderate equity growth keeps balance-sheet risk non-trivial.

Cash Flow

Cash generation is the weak spot. While operating cash flow improved to ~¥30.8B TTM, free cash flow is still modest at ~¥6.3B TTM and has been negative in several recent years (notably 2023–2025 annual). Cash conversion is inconsistent, with free cash flow not reliably tracking earnings across periods, which raises the risk that profitability improvements may not fully translate into discretionary cash available for debt reduction or shareholder returns.

Breakdown	TTM	Mar 2026	Mar 2025	Mar 2024	Mar 2023	Mar 2022
Income Statement
Total Revenue	269.92B	259.59B	227.93B	208.86B	165.62B	154.90B
Gross Profit	99.11B	94.73B	81.38B	72.71B	70.19B	65.45B
EBITDA	48.96B	48.05B	35.54B	25.14B	29.49B	29.34B
Net Income	21.44B	18.99B	16.17B	2.20B	15.91B	13.96B
Balance Sheet
Total Assets	488.89B	470.82B	430.65B	371.35B	329.94B	245.67B
Cash, Cash Equivalents and Short-Term Investments	39.82B	45.47B	29.65B	24.26B	32.83B	22.91B
Total Debt	233.66B	232.37B	202.36B	173.06B	144.13B	84.77B
Total Liabilities	299.19B	299.19B	274.76B	234.45B	197.77B	129.07B
Stockholders Equity	189.69B	171.63B	155.89B	136.89B	132.17B	116.60B
Cash Flow
Free Cash Flow	6.34B	-5.33B	-31.11B	-27.93B	8.55B	2.13B
Operating Cash Flow	30.83B	23.40B	8.21B	2.54B	22.13B	12.01B
Investing Cash Flow	-27.75B	-31.29B	-40.39B	-30.28B	-59.73B	-9.10B
Financing Cash Flow	6.09B	21.57B	35.41B	17.48B	46.54B	184.00M

Towa Pharmaceutical Co Technical Analysis

• Technical Analysis Sentiment: Positive
• Last Price: 3620.00
• 50DMA: Positive
• 100DMA: Positive
• 200DMA: Positive
• MACD: Negative
• RSI: Negative
• STOCH: Negative

Evaluating momentum and price trends is crucial in stock analysis to make informed investment decisions. For JP:4553, the sentiment is Positive. The current price of 3620 is below the 20-day moving average (MA) of 3931.00, below the 50-day MA of 3758.50, and above the 200-day MA of 3197.49, indicating a bullish trend. The MACD of 198.98 indicates Negative momentum. The RSI at 72.81 is Negative, neither overbought nor oversold. The STOCH value of 90.04 is Negative, not indicating any strong overbought or oversold conditions. Overall, these indicators collectively point to a Positive sentiment for JP:4553.

Towa Pharmaceutical Co Peers Comparison

Name	Overall Rating	Market Cap	P/E Ratio	ROE	Dividend Yield	Revenue Growth	EPS Growth
4521	80 Outperform	¥159.74B	-44.66	0.44%	4.16%	-5.99%	-96.04%
4534	73 Outperform	¥134.92B	21.89	5.11%	2.34%	4.35%	48.30%
4569	69 Neutral	¥90.80B	9.20	―	3.36%	11.65%	93.46%
4553	67 Neutral	¥217.04B	10.12	11.81%	2.14%	9.32%	30.85%
4547	66 Neutral	¥204.64B	14.85	6.57%	2.48%	13.11%	41.57%
4887	59 Neutral	¥230.87B	-102.51	―	2.28%	12.78%	-105.43%
Sector *	51 Neutral	$7.86B	-0.30	-43.30%	2.27%	22.53%	-2.21%

Towa Pharmaceutical Co Corporate Events

Towa Pharmaceutical Details Group Structure and Merger in Q3 Supplement

Towa Pharmaceutical has clarified the structure of its domestic and overseas operations in supplementary materials for its third-quarter results for the year ending March 31, 2026. The company now categorizes several group firms under “Towa Pharmaceutical, etc.” and “Sunsho Pharmaceutical, etc.” and notes that Sunsho Pharmaceutical became the surviving entity in an absorption-type merger with KAMATA on April 1, 2025, while Towa Pharma International Holdings continues to consolidate its European and U.S. generic businesses.

These organizational disclosures signal an ongoing streamlining and integration of Towa’s group companies, potentially enhancing operational efficiency and transparency for investors. By clearly defining its domestic subgroups and highlighting the role of Towa Pharma International Holdings in managing overseas subsidiaries such as Towa Pharma Europe and Breckenridge Pharmaceutical, the company underscores its efforts to strengthen both its domestic base and international footprint in the generics market.

The most recent analyst rating on (JP:4553) stock is a Buy with a Yen4337.00 price target. To see the full list of analyst forecasts on Towa Pharmaceutical Co stock, see the JP:4553 Stock Forecast page.

Towa Pharmaceutical Posts Profit Growth and Raises Dividend for FY2025

Towa Pharmaceutical reported consolidated net sales of ¥204.1 billion for the nine months ended 31 December 2025, up 5.3% year on year, with operating profit rising 4.7% to ¥19.5 billion and profit attributable to owners of parent climbing 16.8% to ¥17.1 billion. Earnings per share advanced to ¥347.01, total assets and equity increased, and the company maintained its full-year forecast while planning higher annual dividends of ¥80 per share, signaling confidence in cash flow and shareholder returns.

The equity ratio improved to 38.8% from 36.5%, reflecting a stronger balance sheet that may enhance resilience and financing flexibility in a competitive pharmaceutical market. With no major changes in subsidiaries, accounting policies, or earnings guidance, Towa’s steady profit growth and dividend uplift highlight a stable operational trajectory that could appeal to income-focused and long-term investors.

The most recent analyst rating on (JP:4553) stock is a Buy with a Yen4337.00 price target. To see the full list of analyst forecasts on Towa Pharmaceutical Co stock, see the JP:4553 Stock Forecast page.

Towa and Otsuka Forge Manufacturing Alliance to Stabilize Supply of Off‑Patent Drugs

Towa Pharmaceutical has entered into a basic agreement with Otsuka Pharmaceutical to establish a strategic collaborative framework for pharmaceutical manufacturing focused on long-listed and essential off-patent products. Under the collaboration, Towa will take on transfer and contract manufacturing of selected Otsuka drugs and use Otsuka’s licenses to develop generic versions, creating a mutual backup production system intended to address Japan’s growing problem of unstable pharmaceutical supply. While the company expects minimal impact on earnings for the fiscal year ending March 2026, management sees the partnership as a medium- to long-term driver of performance and a significant step in breaking down traditional barriers between brand-name and generic drug manufacturers, with implications for supply security and broader industry cooperation.

The most recent analyst rating on (JP:4553) stock is a Hold with a Yen3801.00 price target. To see the full list of analyst forecasts on Towa Pharmaceutical Co stock, see the JP:4553 Stock Forecast page.