Kirin Returning to a Growth Trajectory in 2024; Health Science Growth a Potential Upside

Narrow-moat Kirin’s fourth-quarter result was a positive surprise, beating the firm’s full-year guidance and our estimates by 10% in part due to lower-than-expected expenses. Profit guidance for 2023, flat year on year, is in line with our expectations, as persistent cost pressure will wipe out most of the profit increase. Yet, we anticipate it will return to a growth trajectory from 2024, driven by easing cost pressures, overseas expansion of pharma sales, and improved brewery profitability. The upside lies in the health science business, which management expects to increase into a meaningful size while we have factored in a marginal contribution through 2027. We have modestly raised our fair value estimate to JPY 2,600 from JPY 2,500 to reflect time value of money. We continue to view shares as undervalued.