Ariake Japan "FY3/26 results: Engaging in earnest with the equity market" (Buy)

研报英文原文证据摘录

Ariake Japan "FY3/26 results: Engaging in earnest with the equity market" (Buy)

Forecast returns

Forecast price appreciation 19.0%

Forecast dividend yield 3.3%

Forecast stock return 22.3%

Market return assumption 7.6%

Forecast excess return 14.7%

Company Description

A manufacturer and marketer of livestock-derived natural seasonings, Ariake Japan is the

leader in the Japan market. The seasonings are widely used, from instant noodles through to

soups. It conducts operations around the globe, including China, Taiwan, Indonesia, and

Europe. A feature of the company is its technological prowess in recreating tastes sought by

customers through completely automated manufacture and blending.

Valuation Method and Risk Statement

Our price target is based on PER. Upside risks include 1) effective use of surplus cash for

measures such as large-scale M&A or strengthening shareholder returns; the company has

core competencies in manufacturing technologies and has a strong track record in overseas

M&A and plant ramp-ups, 2) labour cost increases accelerating and labour shortages

intensifying, leading to higher demand for the company’s extract merchandise, and 3) in

addition to BtoB, the company is proactively moving in to the BtoC space and has

commenced the launch of BtoC products in Europe; these could ramp up smoothly.

Downside risks include 1) with the livestock extract market expanding, companies can

generate strong earnings if they can achieve mass production and high efficiency; with

companies in the sector intensifying operations, competition could stiffen, 2) the company’s

move into the BtoC space could fail and while it has conducted BtoC in Europe in the past,

this did not go well as it overlapped with the Lehman Brothers crisis and impairment losses