On Thursday, Goldman Sachs initiated coverage on Kotobuki Spirits Co Ltd (2222:JP) with a Buy rating and a price target of JPY2,800.00. The firm sees the Japanese premium sweets gift producer, likened to a Japanese version of 'See's Candies', as a strong player in the market due to its direct sales channels and significant brand recognition.
Kotobuki Spirits has achieved a more than 30% increase in average selling prices (ASPs) over the past decade, which has contributed to its gross profit margin (GPM) and operating profit margin (OPM) standing well above the industry average at 60% and 25%, respectively. Goldman Sachs forecasts the company's operating profit to grow year-over-year by 14%, 24%, and 24% in the fiscal years ending March 2025 through 2027, outpacing the Bloomberg consensus.
The analyst cites two primary drivers for the optimistic outlook. First, there is an expectation of solid inbound revenue growth, particularly from the expansion of international airport retail revenue at Fukuoka and Kansai airports. Second, Kotobuki Spirits is anticipated to see sequential gross profit margin improvement, bolstered by price hikes and the ramping up of a new factory starting from the fiscal year ending March 2025.
This positive outlook on Kotobuki Spirits is rooted in the company's strategic positioning at airports, train stations, and department stores, which are key locations for capturing the premium gift market. The analyst's statement underscores the company's potential for sustained revenue and profitability growth in the coming years.
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