Kirin on Track To Meet 2022 Guidance; Restoring Profits to Pre-COVID-19 Levels in 2023 Achievable

Narrow-moat Kirin appears on track to meet its full-year profit guidance. The positive third-quarter results, with sales up 16.8% year on year and core business profit up nearly 37%, were mainly lifted by a spike in domestic alcohol demand prior to the October price hikes and a recovery in Lion’s on-trade demand, in addition to continued strengths in the pharmaceutical (Kyowa Kirin) and U.S. beverage (Coke Northeast) businesses. As social activities continue to normalize in Japan, we think Kirin may beat its profit guidance. We have maintained our forecasts and fair value estimate of JPY 2,500. We view Kirin’s shares as modestly undervalued with 13% upside to our intrinsic value. We suggest investors look at rival Asahi which offers more attractive valuations and greater benefits from Japan’s beer tax cuts through 2026.