3183.T

Policy and Industry Context

• Management notes that the new Japanese administration is moving toward implementing subsidies for medical and nursing care facilities, and upcoming 2026 insurance and reimbursement reforms are expected to differ from previous cycles. Proposed changes to remove OTC drugs from insurance coverage to cut national healthcare spending signal a broader shift in national health policy, not just incremental drug and material price cuts.
• Ongoing inflation is pushing up operating costs (especially labor costs), tightening hospital operating margins. The effects of physician work-style reform are gradually becoming visible, and the tight labor market is making it difficult for both hospitals and Win Partners to secure sufficient staffing.

Core Strategic Priorities

• Customer growth support (top priority): Management frames tighter hospital operating conditions as a growth opportunity. In the first half, the company collected 142 customer pain points across new and existing accounts, and will expand business by delivering customized solutions and support to address these needs.
• **Gross profit margin improvement:
  • For mature markets like PCI, the company will strengthen support for key high-volume facilities to expand market share.
  • For high-priced, slow-competition growth market products, the company will improve margins via joint price negotiations with customers and suppliers, and expanded rebate programs tied to higher sales volumes.
  • The company is exploring direct import of new medical devices using its subsidiary Tritech's manufacturing and sales license, to sell through the group's existing distribution network and improve margins.
• WIN Heart Gate logistics network expansion:
  • The centralized logistics hub launched in November 2024 currently serves 13 medical facilities (mostly university hospitals) and covers 60% of Kanto region sales volume, enabling separation of sales and logistics functions. The company plans to expand to 30 facilities and cover 90% of Kanto volume by the end of the fiscal year, with a long-term goal of moving all logistics from 9 Kanto sales locations to the hub.
  • The shift frees ~2 hours per day for sales staff previously spent on logistics work, and cuts monthly inventory management time by 8-10 hours per facility via IC tag usage. Reallocated time will be used for higher-value consultative sales to improve efficiency and profitability.
• **Shinzo-kun medical material management system upgrades:
  • The proprietary system automatically pulls daily IC tag inventory data via cloud to keep product master data up to date. The company is running trials of an AI-powered feature to detect unrecorded material usage across multiple facilities, and plans to build a workflow that allows customers to reuse IC tag data for insurance billing claims in the future. The system has also helped win new business from previously non-client facilities, supporting sales expansion.

Balance Sheet and Cash Flow Highlights

• The increase in on-balance sheet inventory comes from strategic bulk purchases of selected products. Increases in accounts payable and lease obligations correspond to higher medical device purchases and new lease arrangements, respectively. The net asset decrease is driven by increased treasury share purchases. Operating cash flow totaled 1.702 billion yen, investment cash flow totaled 0.633 billion yen (driven mainly by securities sales), and negative financing cash flow reflects share repurchases and dividend payments. Ending cash and cash equivalents totaled 11.021 billion yen, or 16.021 billion yen including time deposits.

• Management maintained all initial full-year 2026 (ending March 2026) guidance targets unchanged from the start of the fiscal year, and aims to outperform the targets after a strong first half performance, targeting sustained revenue and profit growth. • Full-year total revenue is projected at 83.5 billion yen, up 2.6% year-over-year, with all segment revenue projections unchanged from initial plans:

• PCI: Target growth via patient collection support for key facilities and continued growth in high-unit-value DCB sales.
• CRS: Target growth via capturing rising demand for growing products like PFA and continued new customer acquisition.
• CVS: Target modest growth, as SHD market expansion is offset by operating room capacity constraints and partial lost sales territory.
• PPI: Target continued DCB sales growth matching first half performance.
• Neurosurgery: Target continued growth in high-unit-value products like flow diverters.
• NONバス: Target continued growth in gastroenterology and urology products.
• DMS: Target expanded sales of insulin pumps and glucose monitors via enhanced customer support including product seminars.
• Medical Devices: Projects a revenue decline due to public hospital budget constraints, but aims to minimize the decline via early deal prospecting and close customer communication. • Full-year operating income is projected at 3 billion yen, up 6.8% year-over-year, with gross margin projected to rise 0.8pp year-over-year to 13.0% driven by the company's planned margin improvement initiatives. Selling, general and administrative expenses are projected to rise 10.5% year-over-year to 7.8 billion yen, driven by continued aggressive sales activities and hiring. • Full-year net income is projected at 2.05 billion yen, up 1.5% year-over-year, as the prior year had one-off special gains and losses that do not recur this year. • Capital expenditure guidance remains unchanged, with spending focused on new sales system development and IC tag related investments. • The company maintains its planned year-end dividend of 53 yen per share, a 1 yen increase from the prior year, for a projected payout ratio of 73.9%.

All product segments recorded year-over-year revenue growth, and total segment revenue beat the initial plan by 7.2%:

• PCI: Increased revenue driven by growth in procedures using high-unit-value devices including DCB and IVL; performance exceeded plan.
• CRS: Significantly increased revenue, driven by growing adoption of PFA ablation devices and expanding leadless pacemaker sales; performance exceeded plan with contributions from new customer acquisition.
• CVS: Increased revenue driven by growth in structural heart disease (SHD) related products including MitraClip and left atrial appendage closure systems; performance exceeded plan.
• PPI: Increased revenue driven by growing sales of DCB for shunt PTA; performance exceeded plan.
• Neurosurgery: Increased revenue driven by growing sales of embolization coils, thrombectomy catheters, and flow diverters alongside rising procedure volumes; performance exceeded plan.
• NONバス: Increased revenue driven by growth in urology and gastroenterology related products; performance was roughly in line with plan.
• DMS: Increased revenue driven by expanding sales of blood glucose monitoring devices; performance exceeded plan.
• Medical Devices: Increased revenue driven by solid closing of large medical equipment deals, in addition to growing consumables sales; performance exceeded plan.

Total company revenue for the second quarter was 43.738 billion yen, up 12.3% year-over-year. Operating income was 1.466 billion yen, up 17.5% year-over-year, beating plan by 11.9%. Gross profit hit a new all-time high, though gross margin fell 0.4pp year-over-year to 11.8% due to a shift in sales mix toward high-unit-value, lower-margin products. Net income was 1.012 billion yen, up 19.7% year-over-year, beating plan by 12.5%.

• Persistent inflation and rising labor costs are tightening operating margins for the company's hospital customers, creating pressure for cost cutting that could affect product demand and pricing. • The ongoing tight labor market makes it difficult for the company to meet its staffing targets, which could constrain growth and operational capacity; first half operating profit beat plan partially because hiring came in below target, leading to unspent payroll costs. • Upcoming national insurance and reimbursement reforms may bring unanticipated changes to the Japanese medical device market, creating uncertainty for demand and pricing. • Public hospital budget constraints are expected to drive a decline in large medical equipment sales for the full year, creating downside risk for the medical device segment.

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