Could be slow to pass on cost increases caused by situation in Middle East

Research evidence excerpt

Could be slow to pass on cost increases caused by situation in Middle East

Global Markets Research

24 June 2026Kagome

2811.T 2811 JP / EQUITY: JAPAN FOOD, BEVERAGES & TOBACCO

RatingCould be slow to pass on cost increases caused

Remains Neutralby situation in Middle East

Target price

Solid performance both in Japan and overseas in Q1, but we think Reduced from 2,800 JPY 2,700

company will be slow to pass on cost increases from H2

Closing price

We keep our Neutral rating, think company will be slow to pass on cost increases 23 June 2026 JPY 2,546.5

caused by Middle East situation

We lower our business profit forecasts for Kagome. 26/12 Q1 business profits were Implied upside +6.0%

broadly as expected, but we think the company will be slow to pass on cost increases

caused by the situation in the Middle East, which it has not factored into guidance. We

keep our Neutral rating. We retain our valuation methodology and obtain our target price

of ¥2,700 by multiplying our 26/12 EPS forecast by a P/E of 19x. Relative performance chart

26/12 Q1 results: Results in line with our forecasts excluding timing issues for sales

promotion costs

Q1 business profits fell 25% y-y to ¥3.4bn. Profits fell sharply in the Japan segment, where

price revisions in February were not sufficient to offset cost increases, and in the primary

processing business (which manufactures and sells tomato paste), where selling prices for

tomato paste fell. However, profits rose in the secondary processing business (which sells

tomato sauce and other products to restaurants) on increased sales of customized

sauces. The shortfall versus our business profit forecast of ¥3.9bn was due in large part to

sales promotion and advertising costs being pushed back in Japan, and profits were