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CALBEE Inc 2229

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Morningstar’s Analysis

Currency in JPY
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Calbee Beats Guidance Again, but Slowing China and U.S. Demand a Renewed Concern

Jeanie Chen Senior Equity Analyst

Analyst Note

| Jeanie Chen |

Narrow-moat Calbee’s third-quarter profits continued to beat the company's internal targets and our expectations, thanks to improved sales of domestic potato chips and expansion in overseas margins. Despite better-than-expected earnings, management has maintained its guidance, given that weakening demand spotted in China and the United States might prompt additional promotional spending to boost sales. The China snack business, a potential growth engine on our radar, continued to achieve 20%-plus growth, but the pace has been decelerating quarter on quarter. We maintain our forecasts and JPY 4,000 fair value estimate as we are confident that the company will at least meet its full-year profit guidance. The development of snack growth in China will remain a key data point to watch over the next couple of quarters. We continue to view the stock as undervalued with 23% upside.

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Company Profile

Business Description

Calbee, listed in 2011, is a leader in Japan’s snack food industry with nearly 54% of the domestic market. Potato snacks, including chips and the company's original Jagarico and Jagabee potato strips, are a core strength, demonstrated by a dominant 71% share in potato chips. Growth in the Frugra brand, the best-selling cereal product with a 38% share in the domestic cereal market, is the latest growth driver in China. The overseas business, constituting 16% of group sales, has been undergoing restructuring since the partnership with Tingyi and PepsiCo unwound. Apart from China and the U.S., Indonesia and the U.K. are emerging as new growth drivers. Easing competition should end losses in Indonesia while the integration of Calbee U.K. and Seabrook will enhance cost efficiencies.

22nd Floor, Marunouchi Trust Tower Main, 1-8-3 Marunouchi, Chiyoda-ku
Tokyo, 100-0005, Japan
T +81 352206222
Sector Consumer Defensive
Industry Packaged Foods
Most Recent Earnings Dec 31, 2020
Fiscal Year End Mar 31, 2020
Stock Type
Employees 7,195