Morningstar

Morningstar, Inc.

Equity Bottom-Up

Narrow-moat Meiji’s fourth-quarter results fell short of its guidance and our expectation due to underperformance of the moaty food business. The newly announced 2019 guidance, indicating an 8% growth in operating profits, is above our forecasts of flat profits. We have maintained our forecasts given that the company has not factored in any impact of a drug price cut that should be announced by the government during the summer. We continue to find that the midterm profit target of JPY 125…

Narrow-moat Meiji posted another quarter of solid growth, beating our expectations, thanks to rigorous cost control and contribution of newly consolidated KM Biology. Meiji seems on track to meet its profit guidance although the size of inventory return of influenza vaccines remains a swing factor of the fourth-quarter profits. Despite the recent weakness in its probiotic yogurt sales, we expect the company will leverage its product development and marketing capabilities as well as brand equity…

Meiji’s strong profit rebound in the second quarter was a positive surprise as we had expected the unfavorable hot summer would continue depressing sales and profits. Rigorous cost control in the food business combined with a solid pharmaceutical sales growth contributed to the 15% like-for-like growth in operating profits. Management has revised up its full-year guidance marginally, with sales up 0.5% and operating profits by 1.5% to reflect consolidation of KM Biologics and sales/profit…

We have revised our profit forecasts downward by 3%-5% for 2018 onward following Meiji’s disappointing firstquarter results. Sales fell 1% (reported negative 1.6% including the impacts of revision of trade terms), while operating profits plunged 19% from weakness in the moaty food business, in part due to hot weather. While management retains its full-year guidance, the second-half targets look challenging. As hot weather is likely to continue depressing demand for dairy and chocolate products…

Narrow-moat Meiji’s fourth-quarter results fell short of its guidance as expected but were in line with our estimates. The newly announced 2018 guidance is consistent with our forecasts, but the medium-term profit target of JPY 125 billion for the three-year period ending 2020 exceeds our forecasts by 13%. The difference between the guidance and our estimates lies in the profit outlook for the pharmaceutical business. While we have mostly retained our profit forecasts, we have lowered our fair…

Japan

MEIJI Holdings Co., Ltd. is the holding company established by reorganization of Meiji Seika Pharma & Meiji Corp.  The company manages subsidiaries engaging in production & sales of confectionary, milk, dairy products, and pharmaceuticals.

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