Initiating Coverage of Shiseido with JPY 2,460 FVE and Narrow Moat Rating
We initiate coverage of Shiseido with a fair value estimate of JPY 2,460, which implies a forward P/E of 32 times, enterprise value/EBITDA of 11 times, and a free cash flow yield of 2.4% to estimated results for fiscal 2017. We assume organic top-line growth to be in line with our forecast for industry growth of around 4% in the next five years. Further, we estimate operating margins will improve from 4.9% in 2015 to 7.8% in 2020, driven by a higher-margin product mix and steps to eliminate exce...Shiseido is mainly engaged in the manufacture and sale of cosmetics, toiletries, beauty products, health foods, beauty foods and pharmaceuticals. Along with its affiliates, Co. operates in seven business segments: Japan, China, Asia Pacific, Americas, EMEA, travel retail, and professional. Co. markets a wide range of skin care products, hair care products, body care products, perfumes, toiletries, health foods, pharmaceuticals, medical cosmetics, analyzers and other products through cosmetics specialty stores, drugstores, department stores, airport duty free stores and online. Co.'s principal brand names include "SHISEIDO," "cle de peau BEAUTE," "ELIXIR," "MAQuillAGE," "NARS" and "IPSA."
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