狮王（4912）：利润率提升的理由

FY12/25E FY12/26E421.1429.077.4983.0331.536.429,666.3332,338.11 FY12/27E439.788.0039.134,509.67 Hisae Kawamoto * | Equity Analyst+81 3 5251 6159 | hisae.kawamoto@jefferies.comShogo Sawada * | Equity Analyst+81 3 5251 6117 | ssawada@jefferies.com.Source: Company data, Jefferies estimatesExhibit 2 - Lion (4912) Fwd P/E and EBITmargin, 19x is low end..15.020.025.030.035.040.0Fwd PELow end P/EEBIT margin (RHS)Source: FactSetExhibit 3 - Japan HPC Advertising cost.FY24LionJPY bn4912Japan parent Advertising cost12.1% of total advertising cost64.7%Total Consolidated Advertising cost18.7Company EBIT bn26.3% of Company EBIT45.9%Source: Jefferies estimate, company dataNote: Operating profit for Kao The Long View: LionInvestment Thesis / Where We Differ•Japan margin improvement amid enhancement in oral care andhealthcare categories.•Overseas business is firm in oral care and value-added detergentbusiness.Base Case,¥2100, +34%•Japanmarginenhancementin oral care and healthcarecategories.•Overseas business is firm in oral care anddetergent business.•Price target of ¥2,100 based on FY12/25EEBIT of ¥31.5bn, EV/EBITDA of 8x, P/E 23x.Sustainability MattersTop Material Issues:1) Product Design & Lifecycle Management2) Supply Chain Management3) GHG EmissionsCompany Targets:1) GHG emissions: Reduce CO2 emissions at business locations by 55% (vs. 2018, absolute amount).Reduce lifecycle CO2 emissions by 30% in 2030 (vs. 2017, absolute amount).2) Achieve petrochemical-derived plastic usage rate below 70% by 2030.Qs to Mgmt:1) Concerning GHG emissions reduction, specific examples of business locations, factories, andsupply chains and progress in initiatives.2) Changes in consumer reaction and retail store price competition in response to the promotion ofthe use of resource-recycling containers.Please see important disclosure information on pages 9 - 14 of this report.This report is intended for Jefferies clients only. Unauthorized distribution is prohibited. improvementamid Upside Scenario,¥2350, +50%•Rapid growth in Japan in demand forhandwash soap.•Competition eases, margin expands, sales ofvalue-added items grow.•Upside scenario price target is¥2,350(FY12/25EEBIT of¥33.2bn,EV/EBITDAmultiple of 9x, and P/E of 25x). Downside Scenario,¥1350, -14%•Topline and share decline•Input cost inflation•Bearish scenario price target is¥1,350(FY12/25EEBIT of¥25.2bn,EV/EBITDAmultiple of 5x, and historical low-end P/E of19x).Catalysts•EBIT margins rise to 10–15%by Japanrestructuring, fixed cost reduction.•Sales and margin increase in China, SouthEast Asia. 2 All-time high ¥2bn/quarter boost from A&P cost curtailment and shrinkage of raw materialsimpact:Lion’s business profit incurred quarterly setbacks of a few ¥100mn to ¥4.6bn YoY inFY12/21–23 due to raw material market conditions. We think it faced high exposure from useof palm oil in fabric care business. Competition with P&G and others resulted in profit setbackfrom A&P costs.In 1Q FY12/25, meanwhile, Lion received an earnings boost of ¥2bn from decline in A&P costs,including ¥1bn from reduction of advertising outlays in Japan. Lion has traditionally had a highSG&A expense ratio in Japan, and this provided large room for cutbacks in advertising costs.While full-year guidance projects a ¥1.5bn setback from increase in A&P expenses, we believecurtailed advertising is unlikely to fully utilize the budget.Business profit outlook:We raise the earnings outlook, even with a cutback in sales that reflectsmarket trends. Our estimates are ¥31.5bn in FY12/25 (+19.7% YoY, vs. ¥31.2bn previously,¥30.0bn guidance, and the ¥30.3bn consensus) and ¥36.3bn in FY12/26 (+15.4% YoY, vs. ¥35.9bnpreviously and the ¥33.2bn consensus). While the consensus expects earnings on track with theplan, we forecast upside.Company assumes ¥152/USD for FY25. JPY appreciation is positive for earnings - a 1 yen movewould be plus ¥50mn, by company estimates.Exhibit 4 - Lion (4912) EBIT YoY changes (JPYmn) in Material cost and A&P cost.(5,000)(4,000)(3,000)(2,000)(1,000)01,0002,0003,000Source: Company data, Jefferies estimatesUpside likely from higher Advertising cost savingsthan peersLion's advertising expenses in Japan totaled ¥12.1bn, or 65% of its consolidated Advertisingexpenses of ¥18.7bn. Lion competes with Kao and P&G in fabric care and other products. Thecompany's ratio vs group EBIT of ¥26.3bn is also higher than those of Kao and Unicharm.Therefore, we believe there is significant room for cost containment due to the trend of curbingmass TV advertising in FY25 and strategic non-focus on Fabric Care.Please see important disclosure information on pages 9 - 14 of this report.This report is intended for Jefferies clients only. Unauthorized distribution is prohibited. Input material cost mnA&P cost mn Exhibit 5 - Japan HPC Advertising cost.FY24JPY bnJapan parent Advertising cost% of total advertising costTotal Consolidated Advertising costCompany EBIT bn% of Company EBITSource: Jefferies estimate, company dataNote: