Create Medic(TYO.5187)

Net-Net, Dividend 4%, Aging population brings a stable demand, Growth in overseas market.

Summary

• Business : Catheter

• Valuation : Net-Net, PER=10x, PBR=0.5x

• Dividend: 37 yen (FY2025 forecast), expected dividend yield = 4%, expected payout ratio = 39%

• Future Catalyst : home medical care expansion in Japan, growth for overseas market(China, Sounth Asia, India, Europe)

• Risk : Medical care budget cut, China business regulation.

• My Position: Holding (average buy price = 947 yen)

Business Analysis

Understanding at a glance

What does Create Medic do?

Create Medic produces a catheter used for urinary organs, digestive organs, PEG (Percutaneous Endoscopic Gastrostomy). These catheter products are made by silicone rubber, which is less stimulating for a human mucosa.

*For English product site. (Link)

As you know, Japan faces the aging population issue, which brings the stable demand for Create Medic products. Also, due to the lack of hospital capacity(*medical human resource is limited), government promotes ‘home medical care‘ where Create Medic products are used.

*The number of ‘Home-visit Nursing Service’. Blue line is for medical, red line is for nursing. Home medical care is increasing. (Link)

*Long-term hospitalized costs a lot, so promoting home medical care will reduce the national medical care cost. Government allocates the budget as ‘地域医療介護総合確保基金‘. This budget is used for home medical care as well. (*Yellow line in above image)(Link)

Growth of Overseas Market

Create Medic has a plan, the target overseas sales ratio will be 50% in 2034. Currently, it’s 35%. China is the current main market, which is 70% of overseas sales. Same as Japan, China is also aging. In 2040, the number of over 65 years old people will account for 20% of the overall Chinese population. So China is a growth factor for Create Medic products. Of course, there are some concerns in China market. First, Chinese government tries to reduce medical care costs. For example, government bulk purchases of medical kits for the public hospital to put down the purchase price. Second, China tries a domestic production of medical kit. Public hospitals are already required to purchase a domestic product to some extent. Create Medic built the factory in Dalian in China for the local production.(*Even if foreign companies, local production products are treated as ‘domestic products‘.)

*’海外販売’ is overseas sales. ‘中国販売‘ is sales in China. These are increasing. (Link)

In addition to China, Create Medic tries to expand to India, South Asia. They have a factory in Vietnam. Along with the high economic growth, medical care expense will also increase in these countries, so there is a huge market opportunity for Create Medic. Also, they try to export to Europe based on their products which satisfy a strict safety standards.

*They highlight the importance of overseas market in mid-term management plan. Estimated medical kit market in China is 41.6 billion USD, India 18.2 billion, Indonesia 4.6 billion. (Link)

Share Option, Convertible Bond, Dilution?

In 2025/07/07, Create Medic announced the funding from Yokohama Capital via share option and CB. Yokohama Capital is the group company with Yokohama Banks, which is the main bank for Create Medic. The funded money(1.5 billion yen) will be used for the future growth.(M&A, Investing to the overseas business etc...)

*Link

If Yokohama Capital exercises the right of share option & CB, the amount of new shares accounts for 16% in overall outstanding. For existing shareholders, it’s not good news, but there is a restriction to exercise the right in some interval, so the interest of existing shareholders is considered. Also, Yokohama Capital intends to increase the long-term Create Medic value, I don’t think they try to sell the share in the market right away.

Valuation

Based on the latest financial position in FY2025 Q1(*As of 2025/03), it’s Net-Net stock. PER is 10x, PBR is 0.5x.

Calculating “Cash to distribute for shareholders“ + PER valuation, there is a margin 29%~59%. Considering the stable demand in Japan and the growth of overseas markets, I believe Create Medic can grow the Net Profit in the future, which means the current valuation is attractive.

Shareholder Return

The latest expected dividend is 37 yen with a yield of 4%. Also, Create Medic announced the share buybacks in 2025, which amount is 200 million yen. Total shareholder return yield(dividend + share buybacks) is 6%. It’s not bad. The company sets the target as total shareholder payout ratio(dividend + share buybacks) is over 50%.

*Share buybacks announcement in 2025 (Link)

*The company discloses how to achieve the PBR 1.0x(*Current PBR is 0.5x). Last year, they did share buybacks, which amount was 500 million. (Link)