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Omega Investment Co., Ltd.

Cosmo Bio (Company note – 2Q update)

Coverage
Share price (9/3) ￥1,251 Dividend Yield (26/12 CE) 4.0 %
52weeks high/low ￥1,486/1,083 ROE(25/12) 3.7 %
Avg Vol (3 month)  5.4 thou shrs Operating margin (25/12) 3.2 %
Market Cap ￥7.56 bn Beta (5Y Monthly) 0.2
Enterprise Value ￥3.15 bn Shares Outstanding 6.048 mn shrs
PER (26/12 CE) 22.2 X Listed market TSE Standard
PBR (25/12 act) 0.7X    
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FY12/2026 2Q results exceeded the initial forecast

◇  FY12/2026 2Q financial results highlights: Solid progress

Cosmo Bio’s FY12/2026 2Q (interim period) financial results, announced on August 5, 2026, came in above the initial forecast (Note: earnings forecast revision announced on July 24, 2026).

Net sales were 5.91 billion yen (up 9.5% YoY), operating profit was 0.28 billion yen (up 1.2% YoY), ordinary profit was 0.34 billion yen (down 0.8% YoY), and interim net income attributable to owners of the parent was 0.28 billion yen (up 10.5% YoY).

The USD/JPY exchange rate weakened to 155 yen/USD (149 yen/USD in the same period of the previous fiscal year), which was a headwind for the company given its high dependence on imports. However, exports and contract services performed strongly, while orders for consumables also increased amid heightened tensions in the Middle East. As a result, gross profit increased 9.3% YoY, while the gross profit margin was 34.5%, almost unchanged YoY. Although operating profit grew only slightly, this reflected increased investment in human capital and R&D and suggests the company continues to invest actively for growth. Overall, the results are positive. The company also sold a portion of its investment securities. Inventory was controlled, and the cash balance increased.

◇ FY12/2026 full-year earnings forecast: Minor revision

The full-year earnings forecast was revised slightly on July 24, 2026, and the revised forecast was left unchanged in this earnings announcement. Net sales are forecast at 11.50 billion yen (up 6.8% YoY), operating profit at 0.27 billion yen (down 21.3% YoY), ordinary profit at 0.38 billion yen (down 22.4% YoY), and net income attributable to owners of the parent at 0.32 billion yen (down 5.1% YoY).

Despite first-half results exceeding the forecast, the full-year forecast increase was limited. This is because the assumed exchange rate for the second half was revised to 160 yen/USD (from the initial assumption of 152 yen/USD), incorporating higher costs for the domestic import purchasing and sales business, and because the company plans to make proactive investments to strengthen global sales and fully develop new businesses.

Amid the continuing trend of yen depreciation, the company’s stance of aiming to exceed its initial business plan while continuing to invest for growth deserves appropriate recognition.

◇  News on new businesses continues

Following “Next-generation femtech: Discovery of the PMS-mitigating effect of intake of lactic acid bacterium ‘KB-1’ and joint filing of a use patent” (March 27, 2026) and “Notice Regarding the Start of Construction of a New Poultry House for the Expansion of the Chicken Egg Bioreactor Business” (May 14, 2026), the following release has also been announced. The company appears to be steadily taking steps toward creating high-value-added businesses.

· Notice regarding the selection of the “Development of a Low-Cost Production Process for Sweet Protein Using the Chicken Egg Bioreactor” for the “Research and Development Support Program for Growth-Oriented SMEs and Other Businesses” (June 30, 2026)

The company was selected as a subsidized business operator under the Small and Medium Enterprise Agency’s FY2026 budget program, the “Research and Development Support Program for Growth-Oriented SMEs and Other Businesses (Go-Tech Program).” The R&D project involves developing a low-cost production process for the sweet protein brazzein using the chicken egg bioreactor. Brazzein could become an ingredient that lets people “enjoy sweetness without gaining weight,” and expectations are rising for its commercialization potential.

◇ Stock price trend and points of focus going forward

The stock price has remained on an upward trend since 2024, and following the November 13, 2025 news release, “Successful development and manufacturing of the sweet protein ‘brazzein’ using the chicken egg bioreactor,” it reached a recent high of 1,486 yen and continued to trade within a high range. However, because the FY12/2026 earnings forecast announced with the full-year financial results on February 13, 2026 called for higher revenue but lower profit, the stock has continued to face upside resistance. News of new businesses has also not been enough to move the stock price significantly.

The current valuation is a PBR of 0.73x and a forecast dividend yield of 4.0%, suggesting limited downside risk. However, the forecast PER is 22x and actual ROE is 3.7%, and for the stock price to re-enter an upward trajectory, earnings expansion and greater clarity regarding the potential of new businesses will likely be necessary.

Specific points of focus are:

· Whether FY12/2026 business performance will exceed the company forecast: trends in the USD/JPY exchange rate, improvements in labor productivity through the promotion of DX, among other factors.

· Whether medium- to long-term growth potential will become concrete: progress in the globalization of trading company functions and the resulting reduction in foreign exchange risk at the company-wide level, the launch of Scientist3, a contract service matching platform, and the development of and clearer earnings potential for value-added businesses such as the chicken egg bioreactor business and the lactic acid bacteria business.

If new medium- to long-term growth drivers become clear, a scenario can fully be envisaged in which expectations for future ROE improvement push up the stock price and eliminate the discount to book value. In this phase, news releases about new businesses should be watched more closely than before.

Company profile

Cosmo Bio Co., Ltd. is a bio-focused trading company that upholds the objective of “contributing to the advancement of life sciences.” It is one of the major providers of reagents for life science research, supplying as many as 10 million items from about 500 manufacturers worldwide. In recent years, it has expanded globally, advancing the functions of trading companies, launching its own contract services, and entering proprietary manufacturing and sales businesses. Expectations are placed on these to contribute to earnings, improve capital efficiency, and raise PBR.

Key financial data

Unit: million yen 2021/12 2022/12 2023/12 2024/12 2025/12 2026/12
CE
Sales 9,231 9,553 9,340 10,037 10,766 11,500
EBIT (Operating Profit) 1,050 817 521 319 342 270
Pretax Income 1,099 790 653 369 504  
Net Profit Attributable to Owner of Parent 737 517 442 262 337 320
Cash & Short-Term Investments 3,555 3,036 3,025 2,693 2,946  
Total assets 10,072 10,313 10,872 11,723 12,662  
Total Debt 28 27 25 23 22  
Net Debt -3,527 -3,009 -3,000 -2,670 -2,924  
Total liabilities 1,750 1,693 1,844 2,166 2,704  
Total Shareholders’ Equity 7,787 8,052 8,445 8,968 9,373  
Net Operating Cash Flow 648 306 744 241 595  
Capital Expenditure 156 119 120 319 344  
Net Investing Cash Flow -145 -313 -766 -217 43  
Net Financing Cash Flow -420 -236 -201 -479 -283  
Free Cash Flow 617 251 677 25 366  
ROA (%) 7.48 5.07 4.17 2.32 2.76  
ROE (%) 9.73 6.53 5.36 3.01 3.66  
EPS (Yen) 126.9 89.1 75.8 45.0 59.3 56.3
BPS (Yen) 1,344.5 1,385.1 1,447.2 1,565.0 1,651.9  
Dividend per Share (Yen) 36.00 36.00 30.00 50.00 50.00 50.00
Shares Outstanding (Million shares) 6.05 6.05 6.05 6.05 6.05  

Source: Calculated by Omega Investment based on FactSet’s standard criteria, rounded to the nearest whole number.

Share price

Financial data (quarterly basis)

Unit: million yen 2024/12 2025/12 2026/12
  2Q 3Q 4Q 1Q 2Q 3Q 4Q 1Q 2Q
(Income Statement)                  
Sales 2,186 2,280 2,628 3,093 2,309 2,483 2,881 3,331 2,583
Year-on-year 9.4% 11.2% 6.7% 5.1% 5.6% 8.9% 9.6% 7.7% 11.9%
Cost of Goods Sold (COGS) 1,460 1,522 1,770 2,034 1,502 1,612 1,916 2,195 1,678
Gross Profit 726 758 858 1,059 807 871 965 1,136 905
Gross Profit Margin 33.2% 33.2% 32.6% 34.2% 35.0% 35.1% 33.5% 34.1% 35.0%
SG&A Expense 708 713 908 785 805 871 898 864 896
EBIT (Operating Profit) 18 45 -50 274 2 0 67 272 9
Year-on-year -69.0% -509.1% -168.5% -10.5% -88.9% -100.0% -234.0% -0.7% 350.0%
Operating Profit Margin 0.8% 2.0% -1.9% 8.9% 0.1% 0.0% 2.3% 8.2% 0.3%
EBITDA 50 79 -10 308 40 41 121 318 56
Pretax Income 37 48 -69 321 50 26 107 335 74
Consolidated Net Income 27 34 -32 220 35 22 56 233 56
Minority Interest -2 2 -3 7 -2 -1 -7 10 2
Net Income ATOP 28 33 -29 212 38 22 65 222 55
Year-on-year -71.1% 560.0% -138.2% -7.8% 35.7% -33.3% -324.1% 4.7% 44.7%
Net Income Margin 1.3% 1.4% -1.1% 6.9% 1.6% 0.9% 2.3% 6.7% 2.1%
                   
(Balance Sheet)                  
Cash & Short-Term Investments 3,224 3,044 2,693 2,497 3,192 3,192 2,946 3,242 4,068
Total assets 11,739 11,333 11,723 11,516 11,790 12,266 12,662 12,539 12,844
Total Debt 418 370 23 345 490 667 22 641 737
Net Debt -2,806 -2,674 -2,670 -2,152 -2,702 -2,525 -2,924 -2,601 -3,331
Total liabilities 1,953 1,853 2,166 2,160 2,114 2,396 2,704 2,488 2,492
Total Shareholders’ Equity 9,197 8,889 8,968 8,763 9,084 9,279 9,373 9,459 9,758
                   
(Profitability %)                  
ROA 3.01 3.31 2.32 2.12 2.15 2.07 2.76 2.88 2.95
ROE 3.84 4.23 3.01 2.77 2.77 2.69 3.66 3.80 3.85
(Per-share) Unit: JPY                  
EPS 4.8 5.7 -5.1 37.1 6.7 3.9 11.5 39.1 9.6
BPS 1,569.7 1,532.0 1,565.0 1,536.8 1,597.1 1,635.1 1,651.9 1,667.5 1,712.6
Dividend per Share 14.00 0.00 36.00 0.00 25.00 0.00 25.00 0.00 25.00
Shares Outstanding(Million shares) 6.05 6.05 6.05 6.05 6.05 6.05 6.05 6.05 6.05

Source: Calculated by Omega Investment based on FactSet’s standard criteria, rounded to the nearest whole number.

Financial data (full-year basis)

Unit: million yen 2016/12 2017/12 2018/12 2019/12 2020/12 2021/12 2022/12 2023/12 2024/12 2025/12
(Income Statement)                    
Sales 7,427 7,068 7,261 7,590 8,092 9,231 9,553 9,340 10,037 10,766
Year-on-year 1.0% -4.8% 2.7% 4.5% 6.6% 14.1% 3.5% -2.2% 7.5% 7.3%
Cost of Goods Sold 4,655 4,535 4,607 4,710 4,940 5,572 6,112 6,090 6,708 7,064
Gross Income 2,772 2,533 2,654 2,880 3,152 3,659 3,441 3,250 3,329 3,702
Gross Income Margin 37.3% 35.8% 36.6% 37.9% 39.0% 39.6% 36.0% 34.8% 33.2% 34.4%
SG&A Expense 2,257 2,339 2,330 2,474 2,399 2,609 2,624 2,729 3,010 3,359
EBIT (Operating Income) 515 194 324 406 753 1,050 817 521 319 342
Year-on-year 157.5% -62.3% 67.0% 25.3% 85.5% 39.4% -22.2% -36.2% -38.8% 7.2%
Operating Income Margin 6.9% 2.7% 4.5% 5.3% 9.3% 11.4% 8.6% 5.6% 3.2% 3.2%
EBITDA 600 350 507 613 928 1,216 958 669 455 509
Pretax Income 456 400 403 388 1,008 1,099 790 653 369 504
Consolidated Net Income 276 250 278 246 701 768 552 461 269 333
Minority Interest 22 12 17 8 27 31 35 19 7 -3
Net Income ATOP 254 237 260 237 674 737 517 442 262 337
Year-on-year 10.4% -6.7% 9.7% -8.8% 184.4% 9.3% -29.9% -14.5% -40.7% 28.6%
Net Income Margin 3.4% 3.4% 3.6% 3.1% 8.3% 8.0% 5.4% 4.7% 2.6% 3.1%
                     
(Balance Sheet)                    
Cash & Short-Term Investments 1,948 1,483 2,268 2,516 3,259 3,555 3,036 3,025 2,693 2,946
Total assets 7,934 8,126 8,501 8,890 9,640 10,072 10,313 10,872 11,723 12,662
Total Debt 20 20 20 20 20 28 27 25 23 22
Net Debt -1,928 -1,463 -2,248 -2,496 -3,239 -3,527 -3,009 -3,000 -2,670 -2,924
Total liabilities 1,350 1,286 1,445 1,566 1,776 1,750 1,693 1,844 2,166 2,704
Total Sharehjolders’ Equity 6,135 6,381 6,581 6,843 7,358 7,787 8,052 8,445 8,968 9,373
                     
(Cash Flow)                    
Net Operating Cash Flow 573 294 909 569 803 648 306 744 241 595
Capital Expenditure 252 546 152 171 76 156 119 120 319 344
Net Investing Cash Flow 99 -440 -186 -135 42 -145 -313 -766 -217 43
Net Financing Cash Flow -107 -109 -85 -85 -97 -420 -236 -201 -479 -283
Free Cash Flow 444 -185 858 428 767 617 251 677 25 366
                     
(Profitability %)                    
ROA 3.23 2.96 3.14 2.74 7.27 7.48 5.07 4.17 2.32 2.76
ROE 4.20 3.80 4.03 3.55 9.49 9.73 6.53 5.36 3.01 3.66
Net profit margin 3.42 3.37 3.59 3.14 8.33 7.98 5.41 4.73 2.61 3.12
Asset turnover ratio 0.94 0.88 0.87 0.87 0.87 0.94 0.94 0.88 0.89 0.88
Financial leverage 1.30 1.28 1.28 1.30 1.30 1.30 1.29 1.28 1.30 1.33
(Per-share) Unit: JPY                    
EPS 42.8 40.0 43.9 40.0 113.7 126.9 89.1 75.8 45.0 59.3
BPS 1,034.9 1,076.4 1,110.2 1,154.4 1,241.2 1,344.5 1,385.1 1,447.2 1,565.0 1,651.9
Dividend per Share 18.00 14.00 14.00 14.00 34.00 36.00 36.00 30.00 50.00 50.00
Shares Outstanding(million shares) 6.05 6.05 6.05 6.05 6.05 6.05 6.05 6.05 6.05 6.05

Source: Calculated by Omega Investment based on FactSet’s standard criteria, rounded to the nearest whole number.

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