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Pan Pacific International Holdings Corp 7532

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Morningstar’s Analysis

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Economic Moat




PPIH Likely to Beat Profit Guidance on Solid Same-Store Growth and Margins; Shares Overvalued

Jeanie Chen Senior Equity Analyst

Analyst Note

| Jeanie Chen |

We are raising the fair value estimate of narrow-moat Pan Pacific International Holdings, or PPIH (previous Donki) to JPY 1,950 from JPY 1,750 after our discussion with management and better-than-expected same-store sales growth. We think PPIH’s sourcing capability, a key element of its moat sources, was reinforced during the pandemic crisis in which it was able to secure sought-after daily supplies to keep customers coming back to the stores. Additionally, the extensive range of product offerings which enables one-stop shopping also worked in PPIH’s favor during the pandemic as consumers cut trips to the stores. Nevertheless, we view the stock as overvalued, trading at a 20% premium to our fair value estimate.

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Company Profile

Business Description

Don Quijote is the largest Japanese general-merchandise discounter and off-price retailer, operating more than 360 stores nationwide. It offers a wide range of products, including tissue paper and Louis Vuitton handbags. The primary store formats include the Don Quijote format, carrying 40,000-60,000 nonperishable food items targeting singles, and the Mega Donki format, carrying a wide variety of food products targeting families. It also operates a small chain of 37 supermarkets in Hawaii and California and opened its first non-Japan Asian outlet in Singapore in late 2017.

2-19-10 Aobadai, Meguro-ku
Tokyo, 153-0042, Japan
T +81 357257532
Sector Consumer Defensive
Industry Discount Stores
Most Recent Earnings Mar 31, 2020
Fiscal Year End Jun 30, 2019
Stock Type
Employees 48,351