CLSA issued a new rating for Kobe Bussan Co Ltd (3038:JP), shifting from an Outperform to a Hold status, despite increasing the price target to ¥4,750 from ¥4,300. The revision follows Kobe Bussan's recent performance report, which indicated a 5.4% year-over-year growth in August shipments to its same-store network, a slight improvement from the 5.0% growth observed last month.
Kobe Bussan's retail chain, Gyomu Super (GS), also experienced a solid sales increase, posting a 9.2% year-over-year growth for its all-store network. This figure comes after a 10.2% increase reported in the previous month.
The company's store network expanded with three new openings in August, bringing the total to 1,074 stores, marking a year-over-year increase of 41 stores. The growth trajectory suggests that Kobe Bussan is on track to meet its fiscal year 2024 guidance, which forecasts the network reaching 1,083 stores.
Despite the positive growth figures, CLSA anticipates more challenging conditions ahead for Kobe Bussan, with sales hurdles set to rise to 15.3% in September and further to 17.3% in October. The firm's assessment comes after Kobe Bussan's shares outperformed by 42% over the past three months.
CLSA's revised price target is based on a discounted cash flow (DCF) analysis. Although the target indicates an upward revision, the downgrade from Outperform to Hold suggests a more cautious outlook on the stock's immediate growth potential in light of the upcoming sales challenges.
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