Kirin Earnings: Strong Profit Growth Lifted by Price Hikes, On-Trade Recovery, and Cost Control

Narrow-moat Kirin kicked off the year with strong core profit growth thanks to recovery of on-trade volume, price hike benefits, and yen weakness. The results are better than our expectation and above the company’s internal targets. We were impressed by the execution of price hikes and cost control that lifted profits by JPY 18 billion, greatly exceeding the cost increase of JPY 12 billion. Given that the robust growth was partly inflated by the timing of marketing investment, which will pick up from the second quarter, we have maintained our forecasts and fair value estimate of JPY 2,600. We continue to view shares as undervalued, indicating 24% upside to our intrinsic value. Our profit forecasts are a touch above the guidance of flat business profits year on year.