Morinaga Milk Industry: Meeting with president: Vision for the future

Research evidence excerpt

Morinaga Milk Industry: Meeting with president: Vision for the future

Cons.

management resources; (2) the division has actively recruited external talent to support 03/27E 70.5 74.3

sales of functional materials and established an organisational structure that can pursue 03/28E 94.4 86.7

growth through collaboration across marketing, clinical and legal functions; and (3) 03/29E 102.6 95.1

placing both MILEI and the probiotics business under the division heightened awareness

of the challenges facing the remaining low-margin overseas B2C businesses, resulting in Rei Ihara

structural reforms progressing faster than anticipated. Analyst

rei.ihara@ubs.com

+81-3-5208 6227

A clear vision for the future needed for share price to appreciate

Ryunosuke WatanabeIn response to a question on what is needed to drive the share price higher,

Associate Analyst

management said that it is important to present its vision for the future to the equity ryunosuke.watanabe@ubs.com

market. Management apparently believes it is important to clearly communicate, both +81-3-5208 6243

internally and externally, a vision for improving efficiency in the domestic dairy business

and transforming into a functional materials manufacturer. Management also

recognises that disclosures regarding the probiotics business and MILEI have been

insufficient and appears keen to provide disclosures that better convey the growth

narrative. We believe that while conveying its vision for the future is certainly important,

greater enhancement of business value could come from articulating a growth story that

extends across the entire company as a result of leveraging MILEI and the probiotics

business, rather than focusing mainly on Morinaga Milk as the owner of those assets.

Valuation: Price target ¥1,600, rating Buy