Japan Consumer Products: Hong Kong investor visit feedback: Strong expectations for JT, Kikkoman, and Kao

Research evidence excerpt

Japan Consumer Products: Hong Kong investor visit feedback: Strong expectations for JT, Kikkoman, and Kao

Goldman Sachs Japan Consumer Products

plant operations materializes, many HK investors we met with said they preferred

the company within the sector, chiefly on expectations for price hikes. Regarding

Ajinomoto, our impression is that investors have high expectations for profit

momentum in Apr-Jun, as the company saw little in the way of higher costs

stemming from the Middle East situation during the quarter.

n Beverages/tobacco: On JT, our conversations with investors focused on the

potential for a dividend hike at the time of Apr-Jun results, with investors bullish on

the name even without a dividend hike due to JT’s inflation resilience and

expectations for an FY12/26 guidance beat. With respect to Kirin Holdings (Sell) and

Asahi Group (Not Rated), there was high interest in the timing of a reversal in share

price performance.

n Cosmetics/toiletries: We think market expectations for Kao were already high

following the confidence shown by management at the CEO meeting in late June,

and we see upside as limited from here. Regarding Shiseido, some investors argued

that the shares no longer appear undervalued in the wake of gains driven by

Japanese department store sales and datapoints relating to Hainan Island. For

Unicharm, we note some investor concerns about sales/profit momentum in

Southeast Asia (including China) and a lack of medium-term growth drivers.

Price Target Risks and Methodology - Toyo Suisan Kaisha

Valuation methodology: We are Buy rated on Toyo Suisan. Our 12-month target price

of ¥14,200 is based on FY3/27E-FY3/28E average EV/NOPAT of 17.5X, representing a

14% discount (+1SD vs historical 3-year average) to the sector average multiple of

20.7X.