Kirin's Flat Profit Guidance and Exit of Myanmar No Surprise; Share Buyback Earlier Than Expected

Narrow-moat Kirin’s fourth-quarter core business profits (gross profits - SG&A) and guidance of marginal profit growth for 2022 are largely in line with our expectations. As we have recently highlighted, cost inflation (JPY 14 billion) and increased investment will cap 2022 profit growth. The announcement of withdrawal from Myanmar is no surprise, but the JPY 50 billion buyback program takes place earlier than we had anticipated. Despite a slow start, management aims at 13% CAGR in business profits, compared with our projection of 4.5% CAGR, for the three-year midterm plan ending 2024. With uncertainties surrounding Myanmar Breweries being removed, we expect the market will focus on execution of premiumization strategies for domestic brewery business, cost reduction, and Australia restructuring in addition to new business development. We have maintained our fair value estimate of JPY 2,500 and continue to view shares as undervalued, offering 26% upside to our intrinsic value.