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Price Target2267.JPAdjusted EPS2267.JP (JPY)OLDSource: Bloomberg, Bernstein estimates and analysis.the time to look for itIf an inflection is on the cards for Yakult, now is the time. In Japan, initial momentum followingthe Y1000 Light variant launch in the retail channel is encouraging and, a month on, we areobserving significant increases in shelf space in many outlets. In China, volumes are back ingrowth, the launch of a second flavour variant (Muscat Grape) looks set to sustain this, theimpact of December’s Shanghai factory closure is flowing through to the P&L, and we seemore plant closures on the cards later this year. And the launch of Indonesia’s first flavourvariant (Mango) in June, coming on the back of the Y1000 Hong Kong roll out, suggests thatthe company is finally getting serious about innovating their overseas portfolios.While the stage is set in Japan with the Y1000 Light launch, it is still too early to price insignificant and sustained 1000 series growth so will be looking to the May/June to calibratethe rate of repeat purchase, but channel inventories tend to be very low given the c. 21dayproduct shelf life, and the initial signs are encouraging. In May, Y1000 needs to grow c. 8% inorder to return overall 1000 Series volume growth to positive territory, by our estimates, andwe would expect this to be a material positive catalyst for the stock if delivered.In China and Indonesia, we expect to get the first read on the new flavor variants in May andJuly. Before factoring in upside from this new strategy, or any incremental plant closures inChina, we expect divisional margins to expand by 100bps in 1Q and 150bps for the full year.Clickhereto register for ourYakult GM fireside chaton June 4th.Investment ImplicationsWe maintain ourOutperform rating and cut our PT from ¥4,800 to ¥4,400havingupdated our model to reflect the weak Q4 print, a cautiously optimistic view on Y1000 Lightand FX (model). We have cut our FY3/26 Core OP estimate by 8% but remain 4-10% aboveconsensus.See the Disclosure Appendix of this report for required disclosures, analyst certifications and otherimportant information. Alternatively, visit our Global Research Disclosure Website.First Published: 27 May 2025 10:25 UTC Completion Date: 27 May 2025 10:25 UTC 4,400.00 JPY(4,800.00OLD)F27E189.30213.06FinancialsEBIT (M)Net Debt/EBITDA (x)Net Earnings (M)Revenues (M)ROIC (%) F25AF26E150.48172.30--193.11F25AF26EF27ECAGR55,39259,64966,1959.3%(2.07)(2.39)(2.57)11.3%45,53449,72554,6329.5%499,683497,006527,1772.7%6.46.87.0--Close DateJPLFYEDiv YieldEV (JPY) (M)PerformanceAbsolute (%)JPL (%)Relative (%)¥3800¥3600¥3400¥3200¥3000¥280005/24 Table Of ContentsIf an inflection in Japan is on the cards, now is the time.................................................................................................................................... 2Momentum in Asia is also improving......................................................................................................................................................................... 5Model updates and valuation....................................................................................................................................................................................... 8Monthly Sales history - Japan....................................................................................................................................................................................10Q4 Earnings Highlights................................................................................................................................................................................................11DETAILSIF AN INFLECTION IN JAPAN IS ON THE CARDS, NOW IS THE TIMEOn Monday Yakult announced their first monthly results for Y1000 Light, the low sugar retail variant of their premium 1000series, with the launch driving overall Y1000 volumes back into positive territory (+3.4%) for the first time since they fell intodecline in September 2024 (Exhibit 1). Y1000 Light hit Convenience Store Shelves on April 6thand Supermarket shelves onApril 21stso the overall April monthly number reflects a combination initial channel stocking but only a partial period.In Convenience stores, the company is seeing c. 25% month on month growth of overall Y1000 sales (i.e. limitedcannibalization), and in Supermarkets management are quoting c. 49% growth, so the variant looks to be off to a very strongstart.The May sales numbers (expected around June 25th) are likely to still benefit from a degree of initial channel stocking but willgive an initial read on repeat sell-through, and when the June numbers are released along with the company’s next earningsaround July 30th, we should have a solid read on the like for like sales momentum.In order to return the overall 1000 series into growth in May, Y1000 growth will need to exceed c. 8% in the month, by ourestimates. If achieved, this is like