Meiji Earnings: Advancing Price Hike Benefits Lift Profits and Margins; On Track to Meet Guidance

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.