Ajinomoto Earnings: CDMO and ABF Profit Rebound to Lead Growth in 2024 as Price Hike Benefits Abate

Demand rebound on biopharma service and functional materials (ABF) will lead to profit growth of narrow-moat Ajinomoto in fiscal-year 2024 ending March 2025. While the guidance of 7% year-on-year growth (9% growth currency neutral) in core business profits looks somewhat cautious given conservative foreign exchange assumptions, we acknowledge that the near-term profit prospect will largely hinge on external factors, including industry cyclicality and rivals’ pricing strategies, in addition to currency movement. We have fine-tuned our assumptions—the impacts of which are offset by increased time value of money. We maintain our fair value estimate of JPY 4,500 and continue to view shares, trading at 34% premium to our intrinsic value, as overvalued. Our net profit estimate for fiscal 2024 is 9% above the guidance.