In this briefing:
1. Shiseido Co Ltd: Could Become a Victim of Its Own Success
Shiseido Co Ltd (4911 JP) will Struggle to Replicate its Past Success Over FY2018-23E
In the past few years, Shiseido was able to outpace the rest of the Japanese cosmetics market by a significant margin. Shiseido’s Japanese operations benefited from the tailwinds of an increasing Chinese tourist influx while its international operations steadily expanded its footprint in China and other geographies. The company also managed to improve its EBIT margin in FY2017 to 8.0% cf. 4.3% in FY2016. Margin improvement kept going into 3Q of FY2018 and we expect FY2018E margin to be 10.8%.
In our opinion, Shiseido will struggle to maintain its revenue CAGR of 7.5% over FY2013-18E over the next five years. We expect a more modest revenue CAGR of 4.9% over FY2018-23E.
Also, as a result of revenue growth and other cost efficiencies, Shiseido’s EBIT is expected to grow at a CAGR of 43.9% over FY2014-18E. But we expect Shiseido to find it difficult to improve its EBIT margin from the FY2018E level.
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