Meiji Earnings: Nutrition Misses Q4 Earnings Guidance Amid Pricing War; Shares Still Undervalued

Meiji Holding’s numbers for fiscal 2024 (ending March 2025) were slightly below our expectations, with March-quarter sales and operating income coming in 1.7% and 6.6% below the company's guidance, respectively. This was mainly due to the drag from the nutrition business, which posted an operating margin of 4.2% in the March quarter, down from 14.4% in the previous quarter and 13.2% in the year-ago quarter. While we believe the market is concerned that the company’s operating margin guidance of 12.9% for the nutrition business in fiscal 2025 is somewhat aggressive, we are confident that Meiji’s strong branding will allow the company to improve profitability. We trim our fair value estimate for Meiji to JPY 4,200 from JPY 4,400 as we refresh our operating margin outlook for the food segment, but we continue to believe that Meiji’s shares are undervalued as the market underestimates its pricing power.