Transferring Coverage of Kosé With No-Moat Rating and JPY 6,300 Fair Value Estimate

Kose’s smaller size relative to industry leaders, L'Oréal, Estée Lauder, and Shiseido, leaves it with a narrower brand portfolio and more susceptible to rising competition from new brands. We think Kosé needs to add brands and spend on marketing and distribution to improve product recognition if it wants to expand outside of Japan. We anticipate a measured acquisition strategy to remain focused in Asia, which we view as reasonable to limit financial risks. Notably, Kosé’s net cash position provides flexibility to improve its portfolio.