Company Reports

Kirin's June-quarter revenue rose 9.2% year over year, driven by strong Kirin Beer and Coke-Northeast revenue, aided by foreign exchange tailwinds. Management announced it is acquiring Jamieson Wellness for JPY 218 billion and the completion of the divestiture of Four Roses.

Kirin is stepping up investment in pharmaceutical, health food, and skincare businesses due to secular volume decline in the domestic beer market. Management has completed the divestiture process of the low-return peripheral businesses and reembarked on the acquisition journey with Blackmores, the Australian nutritional supplements company, and Fancl as the latest deals. Management has steadily delivered progress on sales growth and margin expansion for both Fancl and Blackmores. We think there is room for Kirin to improve operational efficiencies and create synergies in sales and marketing over the long run, both domestically and in overseas expansion.

Kirin's first-quarter revenue and operating profit rose 5% and 38% year on year, driven by solid beverage, health science, and pharmaceutical segments. Kyowa Kirin accounted for roughly half of the operating profit increase due to lower research and development expenses and a one-off disposal gain.

Kirin is stepping up investment in pharmaceutical, health food, and skincare businesses due to secular volume decline in the domestic beer market. Management has completed the divestiture process of the low-return peripheral businesses and reembarked on the acquisition journey with Blackmores, the Australian nutritional supplements company, and Fancl as the latest deals. Management has steadily delivered progress on sales growth and margin expansion for both Fancl and Blackmores. We think there is room for Kirin to improve operational efficiencies and create synergies in sales and marketing over the long run, both domestically and in overseas expansion.

Kirin is stepping up investment in pharmaceutical, health food, and skincare businesses due to secular volume decline in the domestic beer market. Management has completed the divestiture process of the low-return peripheral businesses and reembarked on the acquisition journey with Blackmores, the Australian nutritional supplements company, and Fancl as the latest deals. Management has steadily delivered progress on sales growth and margin expansion for both Fancl and Blackmores. We think there is room for Kirin to improve operational efficiencies and create synergies in sales and marketing over the long run, both domestically and in overseas expansion.

Kirin reported 2025 results with revenue and operating profit increasing 4.1% and 19.3% year on year, respectively. Record operating profit was driven by the resilient domestic beer business, improving margins in the health science segment, and cost-control measures.

Kirin is stepping up investment in pharmaceutical, health food, and skincare businesses due to secular volume decline in the domestic beer market. Management has completed the divestiture process of the low-return peripheral businesses and reembarked on the acquisition journey with Blackmores, the Australian nutritional supplements company, and Fancl as the latest deals. Management has steadily delivered progress on sales growth and margin expansion for both Fancl and Blackmores. We think there is room for Kirin to improve operational efficiencies and create synergies in sales and marketing over the long run, both domestically and in overseas expansion.

Kirin reported third-quarter results, with revenue and operating profit increasing 2.6% and 10.6% year on year, respectively.

Kirin is stepping up investment in pharmaceutical, health food, and skincare businesses due to secular volume decline in the domestic beer market. Management has completed the divestiture process of the low-return peripheral businesses and reembarked on the acquisition journey with Blackmores, the Australian nutritional supplements company, and Fancl as the latest deals. However, the shift of strategic direction to wellness has raised uncertainty over Kirin’s long-term growth prospects, where execution plays a key role in integrating the acquired subsidiary and achieving margin expansion. We view Kyowa Kirin and Coca-Cola Beverages Northeast as two segments that have a more certain profit outlook over the next few years. However, the bumpy path associated with Kyowa Hakko may raise concerns about the returns of this 2019 acquisition.

Kirin's first-half 2025 revenue and operating profit increased by 3.7% and 1.3% year on year, respectively.

Kirin is stepping up investment in pharmaceutical, health food, and cosmetics businesses due to secular volume decline in the domestic beer market. Management has completed the divestiture process of the low-return peripheral businesses and reembarked on the acquisition journey with Blackmores, the Australian nutritional supplements company and Fancl as the latest deals. However, the shift of strategic direction to wellness has raised uncertainty over Kirin’s long-term growth prospects, where execution plays a key role in integrating the acquired subsidiary and achieving margin expansion. We view Kyowa Kirin and Coca-Cola Beverages Northeast as two segments that have a more certain profit outlook over the next few years. However, the bumpy path associated with Kyowa Hakko may raise concerns about the returns of this 2019 acquisition.

Kirin's first-quarter sales and operating profit grew 8.8% and 9.9%, respectively, thanks to strong margins in domestic and Australian beer segments, which more than offset increased research and development costs in the Kyowa Kirin segment.

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.

Kirin is stepping up investment in pharmaceutical, health food, and cosmetics businesses due to secular volume decline in the domestic beer market. Management has completed the divestiture process of the low-return peripheral businesses and reembarked on the acquisition journey with Blackmores, the Australian nutritional supplements company and Fancl as the latest deals. However, the shift of strategic direction to wellness has raised uncertainty over Kirin’s long-term growth prospects, where execution plays a key role in integrating the acquired subsidiary and achieving margin expansion. We view Kyowa Kirin and Coca-Cola Beverages Northeast as two segments that have a more certain profit outlook over the next few years. However, the bumpy path associated with Kyowa Hakko may raise concerns about the returns of this 2019 acquisition.

We transfer coverage of Asahi Group Holdings and Kirin Holdings, keeping their narrow moat ratings. We view the key competitive advantages of the two companies’ brewery businesses as entrenched retailer relationships supported by strong brand portfolios and extensive distribution networks. Our fair value estimates for Asahi and Kirin remain unchanged at JPY 2,200 per share and JPY 2,600 per share, respectively. While we believe both companies’ shares are undervalued, we prefer Asahi over Kirin due to the former’s focus on its core beer business as well as its leading market positions across Japan, Europe, and Australia, which should support margin expansion in the long run.

Kirin is stepping up investment in pharmaceutical, health food, and cosmetics businesses due to secular volume decline in the domestic beer market. Management has completed the divestiture process of the low-return peripheral businesses and reembarked on the acquisition journey with Blackmores, the Australian nutritional supplements company and Fancl as the latest deals. However, the shift of strategic direction to wellness has raised uncertainty over Kirin’s long-term growth prospects, where execution plays a key role in integrating the acquired subsidiary and achieving margin expansion. We view Kyowa Kirin and Coca-Cola Beverages Northeast as two segments that have a more certain profit outlook over the next few years. However, the bumpy path associated with Kyowa Hakko may raise concerns about the returns of this 2019 acquisition.

Kirin is stepping up investment to transform itself into a wellness specialist over the long run. The secular volume decline in the domestic beer market has prompted Kirin to seek new growth avenues, of which it identifies wellness leveraging its pharmaceutical know-how and beverage resources as the third growth pillar. Meanwhile, margin expansion of the cash cow brewery business combined with overseas growth of the pharmaceutical sales will bolster mid-term profits. Kirin is pining hopes on the underpenetrated craft beer to invigorate the torpid beer consumption at home.

Narrow-moat Kirin reported fiscal 2024 third-quarter results with revenue above our estimates while operating profit trailed our expectations. Profit growth was mainly driven by price hikes in the US soft drinks business and strong demand for its key commercialized drugs. The domestic beer segment, however, recorded margin contraction due to higher marketing expenses. We raised our 2024 revenue projection but reduced operating profit estimates due to higher sales and marketing expenses as well as associated costs with Fancl’s consolidation. We also raised 2025-28 revenue and operating profit forecasts by 5% to 6% to account for the addition of Fancl. However, the increment to net income is reduced to 4% after accounting for minority interests. As a result, we retain our fair value estimate at JPY 2,600 per share, which implies 15 times 2025 price/earnings, 8 times enterprise value/EBITDA, and 2.8% dividend yield. We continue to view shares as undervalued. We think the headwinds related to losses in Kyowa Hakko are mostly priced in and that the market has overlooked the margin expansion potential from the recovery of Kirin’s domestic beer business.

Narrow-moat Kirin posted robust second-quarter profit growth with core business profits up 44% (positive 28% currency neutral, positive 24% excluding currency and Blackmores) year on year. Double-digit profit growth was achieved across the core beverage and pharmaceutical subsidiaries, while Kyowa Hakko, a drag on profits since 2020, turned profitable. Yet, the profit downward revision on Lion and Kyowa Hakko indicates less successful restructuring outcome. As we have stressed, turning Kyowa Hakko profitable is critical to restore market's confidence in Kirin's strategic pivot and management's execution capability. We have marginally adjusted our forecasts, which leaves an immaterial impact on our fair value estimate of JPY 2,600. We view shares, trading at 23% discount to our intrinsic value, as undervalued. Our 2024 net profit forecast is 4% above the guidance of 1.2% growth.

We anticipated narrow-moat Kirin’s announcement of a tender offer to buy out the rest of nutritional supplement company Fancl's shares, although the timing is earlier than we expected. The deal, priced at around 17.8 times 2024 PitchBook consensus EBITDA, does not look particularly pricey compared with Blackmores’ 20 times and the price it paid for 30% of Fancl in 2019. The acquisition will have an immaterial impact on our fair value estimate of JPY 2,600. We continue to see turning Kyowa Hakko Bio into profitability as a priority to restore the market’s confidence in its strategic pivot to health science expansion.