Chugai Earnings: Slightly Missed Expectations but Still On Track for Full-Year Target

Narrow-moat Chugai's first-quarter earnings were slightly below our expectations mostly due to lower-than-expected royalty income. However, this is still well within the usual quarterly variability, and overall we think the company remains on track to meet its full year guidance. We maintain our fair value estimate of JPY 5,200 per share. Although the market price is close to our fair value estimate, given our positive view of Chugai's pipeline, we think this stock is worth watching closely and potentially buying on dips.