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Omega Investment Co., Ltd.

Cosmo Bio (Company note – 3Q update)

Coverage
Share price (12/11) ￥1,153 Dividend Yield (24/12 CE) 4.3 %
52weeks high/low ￥1,150/1,160 ROE(23/12) 5.4 %
Avg Vol (3 month)  6.0 thou shrs Operating margin (23/12) 5.6 %
Market Cap ￥6.97 bn Beta (5Y Monthly) 0.3
Enterprise Value ￥3.47 bn Shares Outstanding 6.048 mn shrs
PER (24/12 CE) 21.7 X Listed market TSE Standard
PBR (23/12 act) 0.8 X    
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The 3Q cumulative total was in line with the plan despite an increase in revenue and a decrease in profit. We would like to see the progress of strategic measures confirmed in the full-year results.

◇ 3Q FY12/2024 Financial Highlights

Cosmo Bio’s 3Q FY12/2024 results, announced on November 7,2024, showed an increase in revenue but a decrease in profit but were generally in line with forecasts. On a cumulative basis, sales were 7.4 billion yen (+7% YoY), operating profit was 360 million yen (-17% YoY), and ordinary profit was 380 million yen (-30% YoY). Quarterly profit attributable to owner of parent was 290 million yen (-20% YoY).

Sales growth has accelerated since the 2Q, and the performance now exceeds the company’s expectations. Both research reagents and equipment have seen sales increase by 7%. Sales are progressing smoothly with university and corporate customers, and business with bio-ventures is also picking up.

However, the dollar-yen exchange rate fell to 150 yen per dollar on a cumulative basis (a depreciation of 12 yen YoY), and the gross profit margin fell 2.4 percentage points to 33.4% on a cumulative basis. Meanwhile, the company increased personnel expenses and other costs as expected, resulting in declining profits.

◇ FY12/2024 full-year earnings forecast unchanged

The company has again left its full-year earnings forecast unchanged. The forecast for the second half of the year is 150 yen to the dollar, sales of 9.8 billion yen (+4% YoY), operating profit of 390 million yen (-25% YoY), ordinary profit of 450 million yen (-31% YoY), and net profit attributable to owner of parent of 310 million yen (-30% YoY).

The current market rate for the dollar-yen exchange rate is weaker than the assumed rate, so caution is needed. However, the company believes that there is no need to change its initial plan, as the results up to the 3Q have progressed as expected, and it is also feeling a response to the increasing revenue trend.

◇Stock Price Trends and Points to Watch

The company announced its 2Q results on August 5, 2024, when the stock market was in a sharp decline, and announced a full-year dividend increase and a share buyback ‘to achieve management conscious of capital costs and stock prices.’ The company’s share price has since performed strongly, outperforming the TOPIX. The yen has weakened since October, but the company’s share price has had no negative impact.

The main reasons for this are that, in addition to the fact that sales have been strong and profits are on track to meet expectations, there is little concern about a fall in valuations (although the 22x forecast PER is no longer considered undervalued), with a PBR of 0.77x and a forecast dividend yield of 4.25% (3.07% for the year-end dividend alone). Furthermore, the company has repurchased 95,200 shares worth approximately 100 million yen in total by the end of October, and it is expected to buy back approximately 200 million yen worth of shares by July 31, 2025. In addition, the company has set out a medium-term plan for improving its performance and ROE, with the aim of ‘to achieve management conscious of capital costs and stock prices’.

The next point to watch, on top of the dollar to yen rate, is whether the full-year results for FY12/2024 will be in line with expectations, whether the full-year earnings forecast for FY12/2025 will show an increase in profits, whether shareholder returns will be maintained or increased, and what progress will be shown in strategic measures that will lead to medium-term earnings growth and the achievement of an ROE of 8%.

In particular, we are looking forward to seeing the globalization of the trading company business through the use of IT (we expect to see an increase in profits and a reduction in foreign exchange risk through the strengthening of exports), the launch of Scientist3, a matching site for commissioned services, and the visualization of the potential of the Chicken egg bioreactor business.

Company profile

Cosmo Bio Co., Ltd. is a trading company specializing in biotechnology with the objective of ‘contributing to the advancement of life science’. It is one of the leading providers of life science research reagents, offering as many as 12 million items from approximately 500 manufacturers worldwide. In recent years, it has expanded its trading company functions globally and entered into contract services and proprietary manufacturing and sales business. Expectations are high for this contribution to earnings, improved capital efficiency and higher PBR.

Key financial data

Unit: million yen 2019/12 2020/12 2021/12 2022/12 2023/12 2024/12CE
Sales 7,590 8,092 9,231 9,553 9,340 9,800
EBIT (Operating Income) 406 753 1,050 817 521 390
Pretax Income 388 1,008 1,099 790 653 450
Net Profit Attributable to Owner of Parent 237 674 737 517 442 310
Cash & Short-Term Investments 2,516 3,259 3,555 3,036 3,025  
Total assets 8,890 9,640 10,072 10,313 10,872  
Total Debt 25 25 25 25 25  
Net Debt -3,000 -3,000 -3,000 -3,000 -3,000  
Total liabilities 1,566 1,776 1,750 1,693 1,844  
Total Shareholders’ Equity 8,445 8,445 8,445 8,445 8,445  
Net Operating Cash Flow 569 803 648 306 744  
Capital Expenditure 120 120 120 120 120  
Net Investing Cash Flow -135 42 -145 -313 -766  
Net Financing Cash Flow -85 -97 -420 -236 -201  
Free Cash Flow 677 677 677 677 677  
ROA (%) 2.74 7.27 7.48 5.07 4.17  
ROE (%) 3.55 9.49 9.73 6.53 5.36  
EPS (Yen) 40.0 113.7 126.9 89.1 75.8  
BPS (Yen) 1,154.4 1,241.2 1,344.5 1,385.1 1,447.2  
Dividend per Share (Yen) 14.00 34.00 36.00 36.00 30.00 36.00
Shares Outstanding (Million shrs) 6.05 6.05 6.05 6.05 6.05  

Source: Omega Investment from company data, rounded to the nearest whole number.

　

Share price

　

【Reposted】Key points in ‘Towards cost of capital and share price conscious management’

Source: Omega Investment from company materials

Source: Omega Investment from company materials

Source: Omega Investment from company materials

Source: Omega Investment from company materials

Source: Omega Investment from company materials

Source: Omega Investment from company materials

Source: Omega Investment from company materials

Source: Omega Investment from company materials

Source: Omega Investment from company materials

Financial data (quarterly basis)

Unit: million yen 2022/12 2023/12 2024/12
  3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q 3Q
(Income Statement)                  
Sales 2,016 2,426 2,828 1,999 2,050 2,463 2,943 2,186 2,280
Year-on-year -1.5% 3.2% -7.2% -3.1% 1.7% 1.5% 4.1% 9.4% 11.2%
Cost of Goods Sold (COGS) 1,305 1,576 1,789 1,273 1,350 1,678 1,956 1,460 1,522
Gross Income 711 850 1,039 726 700 785 987 726 758
Gross Income Margin 35.3% 35.0% 36.7% 36.3% 34.1% 31.9% 33.5% 33.2% 33.2%
SG&A Expense 635 736 638 668 711 712 681 708 713
EBIT (Operating Income) 76 114 401 58 -11 73 306 18 45
Year-on-year -57.5% -26.0% -30.9% 23.4% -114.5% -36.0% -23.7% -69.0% -509.1%
Operating Income Margin 3.8% 4.7% 14.2% 2.9% -0.5% 3.0% 10.4% 0.8% 2.0%
EBITDA 112 153 435 94 28 112 336 50 79
Pretax Income 70 100 416 136 2 99 353 37 48
Consolidated Net Income 51 76 279 98 1 83 240 27 34
Minority Interest 5 13 15 1 -5 8 10 -2 2
Net Income ATOP 47 63 264 97 5 76 230 28 33
Year-on-year -62.4% -48.4% -27.9% 136.6% -89.4% 20.6% -12.9% -71.1% 560.0%
Net Income Margin 2.3% 2.6% 9.3% 4.9% 0.2% 3.1% 7.8% 1.3% 1.4%
                   
(Balance Sheet)                  
Cash & Short-Term Investments 3,347 3,036 3,026 3,852 3,637 3,025 2,813 3,224 3,044
Total assets 10,098 10,313 10,695 10,852 10,773 10,872 11,594 11,739 11,333
Total Debt 136 27 183 228 219 25 316 418 370
Net Debt -3,211 -3,009 -2,843 -3,624 -3,418 -3,000 -2,497 -2,806 -2,674
Total liabilities 1,565 1,693 1,865 1,762 1,772 1,844 2,101 1,953 1,853
Total Sharehjolders’ Equity 7,979 8,052 8,250 8,509 8,426 8,445 8,903 9,197 8,889
                   
(Profitability %)                  
ROA 5.79 5.07 3.91 4.44 4.12 4.17 3.66 3.01 3.31
ROE 7.34 6.53 5.13 5.69 5.24 5.36 4.76 3.84 4.23
(Per-share) Unit: JPY                  
EPS 8.1 10.8 45.4 16.6 0.9 13.0 39.4 4.8 5.7
BPS 1,372.3 1,385.1 1,419.2 1,458.0 1,443.9 1,447.2 1,525.8 1,569.7 1,532.0
Dividend per Share 36.00 36.00 36.00 36.00 36.00 30.00 30.00 30.00 30.00
Shares Outstanding(million shrs) 6.05 6.05 6.05 6.05 6.05 6.05 6.05 6.05 6.05

Source: Omega Investment from company materials

Financial data (full-year basis)

Unit: million yen 2014/12 2015/12 2016/12 2017/12 2018/12 2019/12 2020/12 2021/12 2022/12 2023/12
(Income Statement)                    
Sales 7,235 7,357 7,427 7,068 7,261 7,590 8,092 9,231 9,553 9,340
Year-on-year 2.6% 1.7% 1.0% -4.8% 2.7% 4.5% 6.6% 14.1% 3.5% -2.2%
Cost of Goods Sold 4,811 4,976 4,655 4,535 4,607 4,710 4,940 5,572 6,112 6,090
Gross Income 2,424 2,381 2,772 2,533 2,654 2,880 3,152 3,659 3,441 3,250
Gross Income Margin 33.5% 32.4% 37.3% 35.8% 36.6% 37.9% 39.0% 39.6% 36.0% 34.8%
SG&A Expense 2,262 2,181 2,257 2,339 2,330 2,474 2,399 2,609 2,624 2,729
EBIT (Operating Income) 162 200 515 194 324 406 753 1,050 817 521
Year-on-year -40.2% 23.5% 157.5% -62.3% 67.0% 25.3% 85.5% 39.4% -22.2% -36.2%
Operating Income Margin 2.2% 2.7% 6.9% 2.7% 4.5% 5.3% 9.3% 11.4% 8.6% 5.6%
EBITDA 248 279 600 350 507 613 928 1,216 958 669
Pretax Income 330 407 456 400 403 388 1,008 1,099 790 653
Consolidated Net Income 200 249 276 250 278 246 701 768 552 461
Minority Interest -1 19 22 12 17 8 27 31 35 19
Net Income ATOP 201 230 254 237 260 237 674 737 517 442
Year-on-year -35.8% 14.4% 10.4% -6.7% 9.7% -8.8% 184.4% 9.3% -29.9% -14.5%
Net Income Margin 2.8% 3.1% 3.4% 3.4% 3.6% 3.1% 8.3% 8.0% 5.4% 4.7%
                     
(Balance Sheet)                    
Cash & Short-Term Investments 1,482 1,498 1,948 1,483 2,268 2,516 3,259 3,555 3,036 3,025
Total assets 8,161 7,790 7,934 8,126 8,485 8,890 9,640 10,072 10,313 10,872
Total Debt 20 20 20 20 20 20 20 28 27 25
Net Debt -1,462 -1,478 -1,928 -1,463 -2,248 -2,496 -3,239 -3,527 -3,009 -3,000
Total liabilities 1,629 1,412 1,350 1,286 1,430 1,566 1,776 1,750 1,693 1,844
Total Sharehjolders’ Equity 6,050 5,951 6,135 6,381 6,581 6,843 7,358 7,787 8,052 8,445
                     
(Cash Flow)                    
Net Operating Cash Flow 297 129 573 294 909 569 803 648 306 744
Capital Expenditure 70 175 252 546 152 182 76 156 119 120
Net Investing Cash Flow -227 -263 99 -440 -186 -135 42 -145 -313 -766
Net Financing Cash Flow -122 -151 -107 -109 -85 -85 -97 -420 -236 -201
Free Cash Flow 244 80 444 -185 858 428 767 617 251 677
                     
(Profitability %)                    
ROA 2.45 2.88 3.23 2.96 3.14 2.74 7.27 7.48 5.07 4.17
ROE 3.25 3.83 4.20 3.80 4.03 3.55 9.49 9.73 6.53 5.36
(Per-share) Unit: JPY                    
EPS 33.9 38.8 42.8 40.0 43.9 40.0 113.7 126.9 89.1 75.8
BPS 1,020.6 1,003.9 1,034.9 1,076.4 1,110.2 1,154.4 1,241.2 1,344.5 1,385.1 1,447.2
Dividend per Share 20.00 16.00 18.00 14.00 14.00 14.00 34.00 36.00 36.00 30.00
Shares Outstanding(million shrs) 6.05 6.05 6.05 6.05 6.05 6.05 6.05 6.05 6.05 6.05

Source: Omega Investment from company materials

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