Intensifying Competition in Immune-Boosting Food Market Weighing on Meiji's Profits

It is no surprise that narrow-moat Meiji revised down its full-year guidance, reducing sales and operating profits by about 4%. Weakness in its moaty lucrative probiotics and yogurt sales is a key concern, which was partially offset by robust growth in influenza vaccines. We reckon that intensifying competition in the immune-boosting food market with many new products being launched is attributable to a slowdown in R1, a probiotic yogurt line promoting immunity health. We have fine-tuned our forecasts, but the net impact on our fair value estimate is neutral and leaves it at JPY 9,800, implying 35% upside. Our profit estimates remain a touch below the fiscal 2020 guidance.