Asahi Earnings: Cost Control and Weak Yen Lift Profits; Shifting Focus to Higher Shareholder Returns

Narrow-moat Asahi Group Holdings’ announcement to boost shareholder returns with a program consisting of dividend hikes, a share buyback, and a stock split, came earlier than our expectation. Meanwhile, the profit upward revision was expected. We foresee improved financial health will continue to bolster shareholder returns, which were constrained by a priority of debt repayment. While the 2024 profit target looks achievable, sluggish demand in the lucrative Oceania market and forex movement are key threats. We have fine-tuned our foreign-exchange and gross margin assumptions, which leaves an immaterial impact on our fair value estimate of JPY 6,600. We continue to view Asahi’s shares, trading at a 20% discount to our intrinsic value, as undervalued. Our net profit forecast for 2024 is a touch above the renewed guidance.