Daily Brief Consumer: Fast Retailing, ADF Foods , Jollibee Foods, Saint Bella, Taste Gourmet, Kimberly-Clark De Mexico-A, Yoshinoya Holdings, Spectrum Brands Holdings, Inc, Target Corp and more

• Yesterday after the close, Fast Retailing (9983 JP) reported salutary Q3 earnings, and raised its full-year (to August) guidance and its final dividend forecast (by ¥50/share)
• Q3 revenue and profit gained sharply (Rev +13.5%, OP +31.2%) everywhere but Greater China. OPMs were up, especially in Japan. Early summer has been good, despite FX impact. 
• New guidance is above consensus, the ADR popped, and with slightly stronger yen on US CPI, that should help. But we approach end-July. Expect lots of pop-sellers.

• Fast Retailing delivered an impressive Q3 report. Sales +10% YoY were +3% above our expectations. 
• Big jump in profitability. OP +31% YoY to Y145b driven by +57% jump in Uniqlo Japan earnings. Record consolidated OPM ~19% 
• Uniqlo’s performance is leaving global peers in its wake. Profitability now rivalling Inditex. However, valuations remain at a premium

• ADF Foods (ADFL IN) is undergoing significant expansions, including brownfield projects in Nadiad and Nasik, and a greenfield project in Surat.
• These projects are expected to boost revenue significantly, enhance operational efficiency, and support the company’s growth plans.
• Company will almost double its revenue in 3 years and similarly PAT will also grow, which makes it attractive on valuation side as well. 

• Jollibee Foods (JFC PM) recently acquired Compose Coffee, the second-largest take-out chain in South Korea’s competitive value coffee retail segment.
• While the acquisition presents growth opportunities for Jollibee, the intense competition and inherent challenges of the value coffee retail segment warrant caution.
• With Jollibee’s Coffee & Tea business vertical now growing into a meaningful size, we recommend listing it separately to enhance visibility, accountability and unlock shareholder value.

• Saint Bella (SAINT HK) is looking to raise up to US$200m in its upcoming HK IPO. The deal will be run by UBS and Citic Securities.
• Saint Bella (SB) is a comprehensive family care group in China, focusing on premium services and products that addresses demand from the lifestyle-minded younger generation. 
• It is the largest postpartum care and recovery group in terms of revenue from ultra-premium postpartum centers in 2023, according to F&S.

• On 5th July 2024, Taste Gourmet (8371 HK)  submitted an application to Hkex to transfer the listing of all its issued Shares from GEM to the Main Board. 
• The company’s case is strong as it meets all the criteria proposed by the exchange, but there is no assurance that it will obtain relevant approval from the exchange. 
• Trading at 6.4x/5.2x PE FY24/25e with 25% of the market cap in net cash and a trailing yield of 8.5%, we believe a mainboard listing would provide incremental visibility. 

• Within Consumer, we see Health & Personal Care as mostly defensive.
• While perfect conditions are hard to align, or remain, these days, we see mostly favorable conditions ahead for this segment, at least where it matters the most.
• Throughout the last years, consumers have faced a wide array of HPC options, some of them later phased out as companies started to focus on their core products amid rising costs.

• Sales increased by 7.4% YoY to JPY47.5bn, driven by store expansion and effective product and sales strategies.
• Operating profit decreased by 38.6% YoY to JPY880mn, impacted by rising labor and raw material costs.
• Net income attributable to owners of the parent fell by 33.5% YoY to JPY681mn, despite higher sales and price revisions.

• SPB plans to spin-off its home & personal care (HPC) business into a separate listed company (SpinCo). The parent will retain Global Pet Care and Home & Garden business units.
• The separation will allow SPB to allocate capital and resources more efficiently towards higher growth categories.  SPB (ex SpinCo) will be a higher-growth, higher margin business.
• HPC business (low-growth and low-margin) has been a drag on the overall valuation of SPB. The spin-off will unlock value as SPB (ex SpinCo) will command higher multiple post spin.

• Target aggressively markdown prices to clear excess inventory and maintain momentum in the business
• Despite challenges, Target navigated through the shifting consumer landscape and drove positive sales growth, albeit at a slower rate
• Target strategically adjusted inventory management and focused on growing categories to stay strong in the retail market

This content is sourced through publicly available sources and has been machine generated. Information displayed is for general informational purposes only. This article was originally published 3 months ago on Value Investors Club.