Analyst Note
| Jeanie Chen |Narrow-moat Ajinomoto’s first-quarter results, with sales up 16.4% (7.7% currency-neutral) year on year and business profits up 4% (negative 3.8%), are ahead of our expectations and the company’s internal targets thanks to the greater-than-expected foreign-exchange impact and healthcare strength, in part inflated by the timing of shipments. As we had pointed out in our note published on July 15, a weak yen has pumped up margins of the healthcare business including functional materials, which offers a cushion against cost pressures. The sales decline in some value-added seasonings categories does not bode well for its growth strategy of lifting margins through premiumization. After the recent rally, we view shares as overvalued, trading at a 16% premium to our intrinsic value of JPY 3,200 (raised on July 15). Our business profit forecast for 2022 is 2% above guidance.