Company Reports

In the first quarter of fiscal 2026, ending March 2027, Meiji's domestic food revenue grew 4% year over year, while pharmaceutical margin improved to 15.2% from 9.8%, on 13.6% growth. Management maintained guidance and announced plans to restructure its China portfolio.

Margin expansion through growth in value-added health foods and an enlarged overseas sales scale will serve as a key driving force behind Meiji’s midterm growth. In the near term, restoring margins squeezed by rapid yen depreciation and cost inflation and minimizing China losses is a priority. Meanwhile, restructuring efforts to enhance pharmaceutical profitability have borne fruit. Pharma profit growth, lifted by new vaccines and overseas expansion, will hold equal importance as food to the fairly challenging growth target of a more than 11% compound annual growth rate in operating profits for the midterm plan ending March 2027.

Meiji's March-quarter revenue of JPY 291 billion was up 3.3%, while operating income was up 27.4%, driven by a 150-basis-point margin expansion. Management guides fiscal 2026 (ending March 2027) operating income to grow 5%, with strength in pharmaceuticals offset by flat domestic food earnings.

Margin expansion through growth in value-added health foods and an enlarged overseas sales scale will serve as a key driving force behind Meiji’s midterm growth. In the near term, restoring margins squeezed by rapid yen depreciation and cost inflation and minimizing China losses is a priority. Meanwhile, restructuring efforts to enhance pharmaceutical profitability have borne fruit. Pharma profit growth, lifted by new vaccines and overseas expansion, will hold equal importance as food to the fairly challenging growth target of a more than 11% compound annual growth rate in operating profits for the midterm plan ending March 2027.

Meiji reported fiscal third‑quarter (ended December) revenue of JPY 307 billion, up 0.5% year over year. Sales growth in the domestic food segment offset weakness in pharmaceuticals. Management maintained operating income guidance at JPY 70 billion. We have transferred coverage to a new analyst.

Margin expansion through growth in value-added health foods and an enlarged overseas sales scale will serve as a key driving force behind Meiji’s midterm growth. In the near term, restoring margins squeezed by rapid yen depreciation and cost inflation and minimizing China losses is a priority. Meanwhile, restructuring efforts to enhance pharmaceutical profitability have borne fruit. Pharma profit growth, lifted by new vaccines and overseas expansion, will hold equal importance as food to the fairly challenging growth target of a more than 11% compound annual growth rate in operating profits for the midterm plan ending March 2027.

Margin expansion through growth in value-added health foods and an enlarged overseas sales scale will serve as a key driving force behind Meiji’s midterm growth. In the near term, restoring margins squeezed by rapid Japanese yen depreciation and cost inflation and minimizing China losses is a priority. Meanwhile, restructuring efforts to enhance pharmaceutical profitability have borne fruit. Pharma profit growth, lifted by new vaccines and overseas expansion, will hold equal importance as food to the fairly challenging growth target of more than 11% CAGR in operating profits for the mid-term plan ending March 2027.

Meiji reported a 3.8% increase in revenue for the second quarter of fiscal 2025 (ending March 2026) year on year. Management lowered revenue guidance while maintaining operating income guidance for fiscal 2025.

Meiji's June-quarter revenue eased 1.8% while operating profit fell 13%. Management reiterated its guidance for fiscal 2025 (ending March 2026) revenue and operating profit to grow 3.5% and 7.4%, respectively.

Margin expansion through growth in value-added health foods and an enlarged overseas sales scale will serve as a key driving force behind Meiji’s midterm growth. In the near term, restoring margins squeezed by rapid Japanese yen depreciation and cost inflation and minimizing China losses is a priority. Meanwhile, restructuring efforts to enhance pharmaceutical profitability have borne fruit. Pharma profit growth, lifted by new vaccines and overseas expansion, will hold equal importance as food to the fairly challenging growth target of more than 11% CAGR in operating profits for the mid-term plan ending March 2027.

Meiji Holding’s numbers for fiscal 2024 (ending March 2025) were slightly below our expectations, with March-quarter sales and operating income coming in 1.7% and 6.6% below the company's guidance, respectively. This was mainly due to the drag from the nutrition business, which posted an operating margin of 4.2% in the March quarter, down from 14.4% in the previous quarter and 13.2% in the year-ago quarter. While we believe the market is concerned that the company’s operating margin guidance of 12.9% for the nutrition business in fiscal 2025 is somewhat aggressive, we are confident that Meiji’s strong branding will allow the company to improve profitability. We trim our fair value estimate for Meiji to JPY 4,200 from JPY 4,400 as we refresh our operating margin outlook for the food segment, but we continue to believe that Meiji’s shares are undervalued as the market underestimates its pricing power.

Margin expansion through growth in value-added health foods and an enlarged overseas sales scale will serve as a key driving force behind Meiji’s midterm growth. In the near term, restoring margins squeezed by rapid Japanese yen depreciation and cost inflation and minimizing China losses is a priority. Meanwhile, restructuring efforts to enhance pharmaceutical profitability have borne fruit. Pharma profit growth, lifted by new vaccines and overseas expansion, will hold equal importance as food to the fairly challenging growth target of more than 11% CAGR in operating profits for the three-year plan ending March 2027.

Meiji’s December-quarter sales grew by 6.6%, but operating income declined by 12.6%, mainly due to a one-off valuation loss in the pharmaceutical segment. Nonetheless, we believe Meiji should still be able to achieve its full-year guidance for revenue of JPY 1.16 trillion and operating profit of JPY 86 billion, with better profitability in the food segment due to price increases. We broadly maintain our fiscal 2024 (ending March 2025) forecasts and fair value estimate of JPY 4,400 per share. We believe Meiji’s 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.

Narrow-moat Meiji’s first-quarter profits were lifted by solid pharmaceutical growth. On the other hand, increased marketing investment and widened losses in China depressed profits of the moaty food business. Volume contraction of the lucrative probiotic business remains a key concern while demand for vaccines, including the ones for influenza and a new one for covid-19, will be the key swing factor to the profit outlook for the rest of the year. Given limited visibility to the vaccine demand, we have maintained our forecasts and fair value estimate of JPY 4,400. We continue to view shares trading at a 17% discount to our intrinsic value as undervalued. Yet, despite Meiji’s ability to generate cash flow, we think the absence of top-line growth remains a key negative weighing on its share price. Our operating profit projection for fiscal 2024 ended March is a touch below management’s guidance.

Margin expansion through growth in value-added health foods and an enlarged overseas sales scale will serve as a key driving force behind Meiji’s midterm growth. In the near term, restoring margins squeezed by rapid Japanese yen depreciation and cost inflation and minimizing China losses is a priority. Meanwhile, restructuring efforts to enhance pharmaceutical profitability have borne fruit. Pharma profit growth, lifted by new vaccines and overseas expansion, will hold equal importance as food to the fairly challenging growth target of more than 11% CAGR in operating profits for the three-year plan ending March 2027.

Margin expansion through growth in value-added health foods and an enlarged overseas sales scale will continue to serve as a key driving force behind Meiji’s midterm growth. Meiji’s efforts to raise profitability through growth in premium functional foods, rationalization of its product portfolio, and cost-cutting initiatives have borne fruit, with margins expanding since bottoming in fiscal 2011. Yet the pace of margin expansion has been slowing.

Narrow-moat Meiji’s profit guidance for fiscal 2026 (ending March 2027), indicating a 38% increase in operating profits over the three-year period, looks challenging without a sizable correction in input costs or a clear revival plan for the domestic consumer product business. We deem recovery of the probiotic yogurt and plain yogurt sales volume crucial to restoring margins and profitability. We have marginally lifted our fair value estimate to JPY 4,400 per share from JPY 4,350 to reflect the increased time value of money. Despite a handsome 31% upside to our intrinsic value, investors’ appetite for Meiji may not rebound until it delivers meaningful top-line growth, which requires new hit products to bolster domestic sales or rapid distribution expansion overseas.

Narrow-moat Meiji looks set to beat its profit guidance for fiscal 2023 ending March 2024. The third-quarter operating profit climbed 17% year on year thanks to price hike benefits and easing cost pressures. On the other hand, persistent volume weakness caused by price hikes continues to depress the top line, leading to only 2.3% growth. We have finetuned our assumptions, which leaves an immaterial impact on our fair value estimate of JPY 4,350. While we continue to view Meiji’s shares as undervalued, a lack of large-scale innovations to boost its top-line growth remains a key challenge facing management and weighs on its share performance. Our profit forecast for fiscal 2023 is a touch above the guidance.

We have raised our fiscal 2023 profit estimates following narrow-moat Meiji’s upward revision but reduced our profit forecasts beyond 2025 given China's more subdued growth outlook. The adjustments leave an immaterial impact on our fair value estimate of JPY 4,350. A wider volume decline of the lucrative probiotic yogurt drinks and persistent weakness in yogurt sales indicate that sales momentum is unlikely to rebound anytime soon. We, therefore, expect food profits to fall short of Meiji's renewed guidance but project the pharmaceutical business to beat the profit guidance, given strong influenza vaccine demand. We think Meiji’s profits may have bottomed and view shares, trading at a 23% discount to our fair value estimate of JPY 4,350, as undervalued. Apart from growth in China, whether it is able to restore sales volume and margins of the domestic probiotic yogurt business is critical to erasing the market’s concerns over the lack of growth drivers. Our profit estimates of fiscal 2023 ending March 2024 remain a touch below the guidance.