Cosmetics Makeover To Lead Kao’s Margin Expansion and Profit Recovery; Healthcare Growth Uncertain

Kao has laid out a long-term plan to guide its growth through 2030, aimed at heightening its global presence and achieving JPY 2.5 trillion in sales with a 16% profit margin. The top-line target, implying 6.1% CAGR through 2030, looks challenging. Prospects of the newly established precision healthcare business look uncertain, given no precedent and little detail in product/service offerings. In contrast, the margin goal seems viable, given room to boost profitability of cosmetics and restore growth trajectory as well as margins of the China baby diaper business. Its innovation endeavors and growth outlook of China and precision healthcare will play crucial roles in accelerating group growth, in our view.