Meiji Earnings: On Track to Meet Guidance Despite Pharma Inventory Write-Downs

Meiji’s December-quarter sales grew by 6.6%, but operating income declined by 12.6%, mainly due to a one-off valuation loss in the pharmaceutical segment. Nonetheless, we believe Meiji should still be able to achieve its full-year guidance for revenue of JPY 1.16 trillion and operating profit of JPY 86 billion, with better profitability in the food segment due to price increases. We broadly maintain our fiscal 2024 (ending March 2025) forecasts and fair value estimate of JPY 4,400 per share. We believe Meiji’s shares are undervalued currently, as we remain confident in Meiji’s strong intangible assets, such as brands and long-term relationships with retailers and suppliers, which can help underpin its pricing power and overcome cost and socioeconomic headwinds in the future.