Cosmos Pharmaceutical (3349) | Japan Downgrade to EW

研报英文原文证据摘录

Cosmos Pharmaceutical (3349) | Japan Downgrade to EW

IdeaM

Upcoming catalysts: 1) F5/26 4Q results (factors behind recent results, company F5/27

guidance), 2) changes in domestic consumption, and 3) changes in market participants’

investment preferences (from tech to non-tech). Cosmos is scheduled to hold a large

meeting in person on July 13. We understand that interactive contact between market

participants and management had declined, partly because Cosmos had switched from

large meetings to video streaming after Covid, and we look for further such changes.

Our view on company fundamentals: Cosmos' relative competitive positioning remains

intact; we expect further progress in initiatives to support customer traffic securing

profitability. Our view that Cosmos boasts superior positioning over rivals is unchanged,

with food prices likely continuing to rise as input costs increase. That said, while other

drugstores and discount stores have started to secure sales & gross margins while

strengthening initiatives that leverage membership programs or apps, Cosmos' response in

this respect seems to have been slow. It is true that there remains some uncertainty over

whether a membership program fundamentally fits the company’s preferred small-

trading-area business model. We also recognize that the impact can vary and that start-up

and operating costs cannot be ignored. However, compared with the past, we believe

there is more reason to allocate management resources to unlocking the value of its

existing customer assets. The market remains crowded with too many stores, newspaper

ads (traditionally used actively by Cosmos) have lost influence as subscriber numbers fall,

and consumer sentiment has become increasingly challenging. In this environment, we see