Kikkoman's Lukewarm Growth Not Commensurate With Its Rich Valuations; Shares Overvalued
Narrow-moat Kikkoman beat its full-year guidance as expected with sales and profits coming in a touch above our estimates. Management has guided a mixed outlook with a 4.4% growth in the top line and 3.3% growth in operating income for 2019. We have moderately lowered our forecasts by 1% to reflect a slower pace of margin expansion, but our profit estimate of a 6% growth remains above the guidance. A sizable increase, nearly JPY 5 billion, in overhead and marketing spend will also depress profit...Kikkoman is a holding company engaged in the manufacture and sale of soy sauce and food products. Domestic Foods Manufacturing and Sales segment manufactures soy sauce, foods products, beverages and liquor including soy sauce, Tsuyu (soy sauce soup base), seasoning mixes, Del Monte seasonings and beverages, soy milk beverages and wines in the domestic market. Domestic Others segment is engaged in the biochemical, chemical and logistics businesses. Overseas Foods Manufacturing and Sales segment offers soy sauce, Del Monte products and healthy foods in overseas markets. Overseas Foods Wholesales segment is engaged in the purchase and sale of oriental foods in domestic and overseas markets.
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