On Wednesday, JPMorgan initiated coverage on Ajinomoto (2802:JP) (OTC: AJINY) stock, a company renowned for its amino acid technology and a diverse portfolio that includes food products, electronic materials, and pharmaceuticals.
The firm assigned an Overweight rating to the stock, accompanied by a price target of JPY7,200.00. JPMorgan highlighted the company's strong position in the global market, particularly in umami seasonings, electronic materials, and pharmaceutical amino acids.
Ajinomoto's growth potential and improved capital efficiency were cited as key reasons for the positive outlook. Despite challenges faced by the healthcare business in FY2023 due to inventory corrections, Ajinomoto's earnings are on the mend. The analyst from JPMorgan anticipates that the company is transitioning into a growth phase.
The company's consolidated earnings are primarily fueled by its core businesses in the seasonings & foods segment and the healthcare and others segment. JPMorgan forecasts a double-digit (%) compound annual growth rate (CAGR) in business profit from FY2024 to FY2026.
In addition to the expected growth in profits, Ajinomoto's management has been actively working to enhance shareholder returns. This approach is likely to result in a significant rise in return on equity (ROE), which is projected to reach 17% by FY2026, up from 11% in FY2023. This increase indicates that Ajinomoto could achieve top-tier capital efficiency within the food sector.
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