Transferring Coverage of Shiseido With a No-Moat Rating and JPY 2,300 Fair Value Estimate

Shiseido has been enduring a history of hits and misses in its brand presence, but we think that, with the issues at Drunk Elephant and excess China inventory in the rearview, a focus on its "Core 3" brands—Shiseido, Clé de Peau Beauté, and NARS—and cost cuts, the company will be able to drive 2025-30 compounded annual core earnings growth of 22%. Shiseido completed the bulk of the restructure of its China operations in 2025, and market share gains are resuming in this key market. However, industry competition is likely to remain challenging, and this could lead to fragile margin gains.