Kobayashi Pharmaceutical: Risk Reward Update

Research evidence excerpt

Kobayashi Pharmaceutical: Risk Reward Update

UpdateM

RiskRisk RewardReward– Kobayashi- KobayashiPharmaceuticalPharmaceutical(4967.T) (4967.T)

Medium-term earnings recovery to continue but consensus ests look too bullish

PRICE TARGET ¥3,950 UNDERWEIGHT THESIS

F12/27e adj. EPS ¥192 x P/E 21x We think the firm's domestic marketing cost

P/E is slightly below the long-term average for this stock at 23.5x but still carries ~10% efficiency initiatives are based on somewhat

premium vs. the toiletry stocks' average P/E (which has come down). We still assume a optimistic assumptions. While OP has

valuation premium, considering continuing profit growth as earnings recover, in addition to entered a recovery phase after bottoming in

the market expectations for the new mid-term plan announcement that could support F12/25, we believe it will remain in this

valuations. recovery phase for the next three years

through F12/28.

¥5,523 The impact from higher raw material costs

Consensus Price Target Distribution ¥3,950.00 ¥6,700.00 remain as a headwind near-term.

MS PT As further growth investments, the firm has

Source: Refinitiv, Morgan Stanley Research Mean Morgan Stanley Estimates specified plans to consider acquisitions on a

scale that could involve taking on more

debt, but the feasibility of this is unclear,

RISK REWARD CHART and there is lingering uncertainty over the

firm's ability to manage such investments if

executed.

JPY

¥6,150¥6,150(+14.53%)¥6,150(+14.53%)(+14.53%)

Consensus Rating Distribution

¥5,370¥5,370¥5,370 25% Overweight

50% Equal-weight

4500 25% Underweight

¥3,950¥3,950(-26.44%)¥3,950(-26.44%)(-26.44%) MS Rating

3000 Source: Refinitiv, Morgan Stanley Research

¥2,750¥2,750(-48.79%)¥2,750(-48.79%)(-48.79%)

1500 Risk Reward Themes

Contrarian: Negative

Disruption: Negative