Meiji Earnings: Food Business Expected to Improve, but Uncertainty Over Pharma

Meiji’s fiscal 2024 (ending March 2025) first-half results outperformed guidance, due to higher-than-expected pharma sales and operating income. Meanwhile, management is keeping its full-year revenue and operating income guidance unchanged at JPY 1,159 billion and JPY 86 billion respectively, despite a downward revision of the pharma segment's second-half guidance to reflect lower sales projection for Kostaive—the new covid-19 vaccine—as the weakness is offset by higher forecasts for the food business. We broadly maintain our fiscal 2024 forecasts and fair value estimate of JPY 4,400. We believe 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.