Asahi and Kirin Earnings: Domestic Beer Business Benefited From Price Hikes; Prefer Asahi

Narrow-moat Asahi and Kirin reported their fiscal 2024 results (ending December 2024) with operating profit for both companies trailing our estimates. Asahi’s profit miss was primarily due to the Australian beer segment and group-level business integration expenses, whereas Kirin’s miss was attributed to recognition of losses in previously held shares associated with the Fancl acquisitions. Our take on the two companies’ earnings is different. We continue to hold a more constructive view on Asahi given the progress seen in its premiumization and product diversification in various key markets. As for Kirin, in our view there is many moving parts with regards to integration of newly acquired Blackmores and Fancl as well as higher research and development costs for the pharmaceutical segment. We like Asahi’s strategic focus on premiumizing its core beer business and the progress in broadening categorial coverage in Australia, the latter of which should revive profit growth in the medium term.