Ajinomoto Small Meeting: Limited Near-Term Impact, Ongoing Preparation for Long-Term Value Enhancement

Overview

This report is a summary of key points from Morgan Stanley’s small meeting on Ajinomoto. The meeting was held on the morning of May 18, 2026 for sell-side analysts. The report says the discussion had limited short-term market impact, but it showed that the company is not complacent with the current favorable earnings environment and is steadily preparing around Middle East risks, the ABF business, management reform, and long-term growth capabilities.

Core views

The core view is as follows: first, the Middle East situation has not caused procurement problems yet, but the risk of rising costs has been incorporated into rolling forecasts, and the company will address this through production, logistics optimization, and price pass-through. Second, the ABF business remains an important growth asset, and the guidance is conservative; pricing will not rely on across-the-board increases, but will be adjusted in line with customer product development, upgrade cycles, material costs, and R&D investment. Third, as the company’s existing businesses move into the phase of reaping investment returns, it is stepping up efforts to build the next stage of growth, innovation organization, external resource integration, global talent, and compensation systems.

Analysis framework

The report uses a meeting-summary plus valuation framework, combining management’s statements on Middle East risks, ABF pricing policy, and organizational reform with Morgan Stanley’s target price, rating system, and industry-relative valuation assumptions to judge the sustainability of long-term value enhancement.

Methodology notes

• Valuation methodsRelative P/E valuation

  Derive the target price using FY3/28e EPS and the food industry average P/E as a relative multiple

  The target price is derived from FY3/28e EPS of ¥169 and a P/E of 30.6x; the 30.6x comes from the food industry average P/E of 17x multiplied by a 1.80x relative multiple. The premium reflects overseas seasoning competitiveness, profit growth in advanced areas such as ABF, and an active share repurchase policy supported by return on capital above the cost of capital.

• Research FrameworkMorgan Stanley ModelWare

  Morgan Stanley internal metric framework

  The report states that, unless otherwise noted, all metrics are based on the Morgan Stanley ModelWare framework.

• Risk ManagementRolling Forecast

  Rolling forecasts and operational optimization for the seasoning business

  The company incorporates the potential impact of the Middle East situation into rolling forecasts and manages cost pressure through production and distribution optimization.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Ajinomoto equity 2802.T

  Covered name in the report

  Strengths

  Strong overseas seasoning business competitiveness; profit growth potential in ABF and advanced areas; positive share buybacks supported by returns above the cost of capital; proactive preparation for long-term growth.

  Weaknesses

  The short meeting content had limited market impact; the ABF business is cyclical; the Middle East situation may raise material and logistics costs.

  Comparison

  For the valuation premium relative to the food industry average P/E, the report uses the industry average P/E of 17x multiplied by a 1.80x relative multiple to arrive at a 30.6x target P/E.

  Risks

  Rising costs due to the Middle East situation, loss of share in ABF amid disruptions in semiconductor substrates, slower Forge revenue growth, sustained high crude oil prices, and prolonged impact from US frozen food recalls.

• ABF and functional materials business

  Key growth business

  Strengths

  The company emphasizes that ABF has been, and will continue to be, an important business; pricing policy aligned with customer product development and product upgrades helps support long-term value.

  Weaknesses

  The business is cyclical and is affected by semiconductor end markets, substrate manufacturers' development cycles, and Middle East cost uncertainty.

  Comparison

  Rather than across-the-board price increases, the company has not previously applied blanket price hikes to old and new ABF products, and does not expect to do so now.

  Risks

  Rising material costs, product upgrades falling short of expectations, and market share losses caused by disruptions in the semiconductor substrate ecosystem.

• Seasoning business

  Core earnings and risk buffer business

  Strengths

  Rolling forecasts are one of the seasoning business’s advantages; overseas seasoning competitiveness supports the valuation premium.

  Weaknesses

  It may be affected by procurement, logistics, and cost pressure related to the Middle East situation.

  Comparison

  The report believes seasoning business growth can offset the weakness in the processed foods umami seasoning market, which is one of the upside scenarios.

  Risks

  Inability to fully pass through costs, weak demand, and production/distribution optimization delivering less than expected.

Key data

• Report Date2026-05-18The report body is dated May 18, 2026 12:08 PM GMT.
• Meeting Time2026-05-18 10:00Ajinomoto held a small meeting for sell-side analysts.
• Target Price¥5200The target price history shows 5,200 on 2026-03-05.
• Valuation AssumptionsFY3/28e EPS ¥169; P/E 30.6xThe P/E is derived from the food industry average of 17x multiplied by a 1.80x relative multiple.
• Potential Cost ImpactAbout ¥30 billionThe company said in its earnings presentation that the Middle East situation could lead to higher costs.
• IndustryFoodThe disclosure page lists the industry as Food.

Impact & implications

In investment terms, the report emphasizes long-term corporate value rather than near-term catalysts. The Middle East situation brings cost and raw-material pressure, but procurement issues have not emerged so far, and the company has rolling-forecast, operating-optimization, and price-pass-through capabilities. Although the ABF business faces cyclicality and uncertainty in the semiconductor substrate ecosystem, it is still viewed as an important business for the company, and future product upgrades may provide a basis for price adjustments. Management reform and the talent strategy further strengthen the company’s ability to transition from the harvest phase of existing businesses to the next growth stage.

Risks

• Rising procurement, material, logistics, and cost pressure due to the Middle East situation.
• Slower Forge revenue growth.
• Share losses in ABF amid semiconductor substrate disruptions.
• Sustained high crude oil prices.
• Prolonged impact from US frozen food recalls.
• Insufficient cost pass-through may squeeze margins.

What to watch

• Whether the actual impact of the Middle East situation on procurement, costs, and logistics expands.
• Whether the company can absorb the roughly ¥30 billion potential cost pressure through rolling forecasts, production and distribution optimization, and price increases.
• The pace of ABF customer product development, the timing of upgraded product supply, and changes in material costs.
• Whether Forge can become profitable earlier and drive faster profit growth in the functional materials business.
• Progress in management reform, innovation organization building, global talent strategy, and compensation system adjustments.
• Whether there are updates to the rating, target price, and company buyback policy.