Bernstein analyst Euan McLeish upgraded the rating on Kikkoman (KIKOF – Research Report) to a Hold yesterday, setting a price target of Yen1,300.00.
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Euan McLeish has given his Hold rating due to a combination of factors affecting Kikkoman’s stock. The company has experienced a 30% decline in stock price over the past year, which McLeish believes has already accounted for the margin downside in its US Wholesale division. This division, considered to have a lower quality business model compared to Kikkoman’s core soy sauce operations, has been facing challenges due to COVID-related disruptions and economic factors like US CPI acceleration and a weak Yen.
Despite the potential for further margin declines and short-term stock price downside due to US dollar depreciation and weak restaurant demand, McLeish expects these movements to be largely influenced by macroeconomic conditions. Additionally, factors such as Japan tariffs, JPY fluctuations, and the risk of a US recession could impact the stock price. However, McLeish believes that the specific downside risks are mostly reflected in the current stock price, justifying the Hold rating.