Ajinomoto: ABF and CDMO growth is expected to accelerate, target price raised to ¥6,300

Overview

This report is Morgan Stanley's company research and earnings forecast update on Japan's Ajinomoto. The core view is that Ajinomoto's unique ABF functional materials and CDMO biopharma businesses will enter an accelerated growth phase in F3/27, shifting the company's earnings mix from traditional food operations toward faster-growing, higher-valued advanced materials and healthcare businesses.

Core views

The report maintains a positive view on Ajinomoto. For ABF, the new plant began operations in October 2025 and is still running on a single shift, leaving substantial room for future capacity expansion; AI-related GPUs are evolving from Blackwell to Rubin, which will increase package substrate area, layer count, and ABF demand. For CDMO, proprietary technologies such as AJIPHASE and AJICAP are contributing more, the small-molecule business is growing steadily, and if Forge achieves EBITDA or operating breakeven, earnings release will accelerate further. The food business is under short-term pressure from cost disruptions caused by fermentation feedstocks, ammonia, cassava, and the Middle East situation, but price hikes, a weaker yen, and easing cost pressure are expected to improve margins from F3/28 onward.

Analysis framework

The report uses segment profit forecasts, scenario-based risk-reward analysis, and a relative valuation framework. Earnings forecasts are broken down by seasonings and foods, frozen foods, functional materials, and biopharma services; valuation derives the target price from approximately ¥208 in F3/29e EPS multiplied by a 30.0x P/E; the risk-reward framework sets bull, base, and bear cases corresponding to ¥7,600, ¥6,300, and ¥4,400, respectively.

Methodology notes

• 盈利预测Morgan Stanley ModelWare

  Segment operating profit forecast

  The report states that unless otherwise noted, all metrics are based on the Morgan Stanley ModelWare framework, and that business profit in the financial statements corresponds to the OP definition used in this section.

• 估值相对P/E估值

  F3/29e EPS multiplied by fair P/E

  The target price is based on approximately ¥208 in F3/29e EPS and a 30.0x P/E; the 30.0x is derived from the food sector's average F28 P/E of 16.5x multiplied by a 1.76x relative multiple. The premium reflects competitiveness in overseas seasonings, accelerating profits in advanced areas such as ABF, and an active buyback policy.

• 风险回报Bull/Base/Bear case

  Three-scenario target prices

  The bull-case target price is ¥7,600, assuming F3/29 business profit of ¥290.0bn; the base-case target price is ¥6,300, assuming F3/29 business profit of ¥278.0bn; the bear-case target price is ¥4,400, assuming F3/29 business profit of ¥235.0bn.

Asset mapping & comparison

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

• Ajinomoto 2802.T

  Covered company and equity investment target

  Strengths

  ABF holds a de facto standard position in semiconductor insulating materials, the CDMO technology platform is advancing commercialization, and overseas seasonings have a strong and resilient earnings structure.

  Weaknesses

  The traditional food business is still affected by raw material costs, geopolitical conflict, and the pace of price pass-through, which may pressure short-term margins.

  Comparison

  The report believes the differentiated growth opportunity brought by its ABF and biopharma businesses is a re-rating driver that ordinary food peers do not have.

  Risks

  The valuation premium depends on higher ABF volume and ASP, improved profitability at Forge, successful price hikes, and easing cost pressure.

• ABF functional materials business

  Core growth driver

  Strengths

  Benefiting from larger package substrate area, higher layer counts, and a higher mix of high-spec products driven by AI GPUs and high-end CPU package substrates.

  Weaknesses

  Growth depends on demand for advanced semiconductor packaging and the pace of customer product upgrades.

  Comparison

  Compared with the traditional food business, ABF has stronger structural growth and valuation re-rating potential.

  Risks

  Supply-chain disruptions in semiconductor substrates, share loss, or weaker-than-expected AI demand could undermine growth.

• CDMO and biopharma services

  Second growth curve

  Strengths

  Proprietary technologies such as AJIPHASE and AJICAP are contributing more, and if Forge achieves profitability, earnings elasticity could improve significantly.

  Weaknesses

  Profit improvement still depends on commercialization progress, capacity utilization, and Forge's growth pace.

  Comparison

  Compared with the food core business, biopharma services offer higher growth but also greater uncertainty in delivery.

  Risks

  Slower Forge revenue growth, delayed profitability, or weaker-than-expected demand for advanced therapies.

Key data

• RatingOverweightMorgan Stanley equity rating; industry view is In-Line.
• Target price¥6,300Raised from the previous ¥5,200.
• Current share price¥5,816Closing price on June 29, 2026.
• Target-price upside8%Calculated based on the target price and closing price.
• F3/27 business profit forecast¥2060亿Up 14% YoY, below the previous ¥208.0bn forecast but above the company's ¥197.0bn guidance.
• F3/28 business profit forecast¥2380亿Up 16% YoY, above the previous ¥232.0bn forecast.
• Functional materials sales forecastF3/27 ¥1247亿；F3/28 ¥1567亿；F3/29 ¥1995亿Equivalent to about 24%, 26%, and 27% YoY growth, mainly reflecting ABF growth.
• Biopharma business F3/27 business profit forecast¥175亿Up 84% YoY, above the previous ¥14.2bn forecast.
• Valuation inputF3/29e EPS ¥208 × P/E 30.0xUsed to derive the base-case target price of ¥6,300.
• Healthcare profit contributionF3/26 30%提升至F3/30 50%The report believes this change reflects a differentiated growth opportunity rarely seen among peers.

Impact & implications

If ABF and CDMO enter an acceleration phase as the report expects, Ajinomoto's investment thesis will no longer be just the stable growth of a traditional food company, but one that also carries the high-growth characteristics of AI semiconductor materials and advanced biopharma services. This could support a higher valuation multiple relative to food-sector peers. However, short-term food costs, foreign exchange, ABF market share, and the pace of Forge's profit delivery remain key variables affecting whether the target price can be achieved.

Risks

• ABF volume or ASP growth may come in below expectations, or share loss may occur amid disruptions in semiconductor package substrates.
• Forge revenue growth may slow and fail to achieve early profitability or EBITDA breakeven as expected.
• Raw material prices such as crude oil, ammonia, and cassava may remain high, keeping cost pressure on the food business.
• A prolonged geopolitical conflict in the Middle East may lead to greater-than-expected cost and supply-chain pressure on the food business.
• The impact of the U.S. frozen food recall may last longer than expected.
• Foreign exchange fluctuations may affect overseas revenue, profit, and valuation assumptions.
• Price hikes may fail to fully offset cost increases, causing the expected F3/28 margin improvement to fall through.
• Relative valuation multiples for the food sector or the company's valuation premium may contract.

What to watch

• Whether ABF orders, volume, ASP, and the share of high-spec products continue to rise.
• The mass-production progress of FC package substrates related to NVIDIA Rubin GPUs and their pull-through effect on ABF demand.
• The pace at which the new plant launched in October 2025 moves from a single shift to higher capacity utilization.
• Whether the planned new plant for 2032 is brought forward due to stronger-than-expected AI demand.
• Commercialization contributions from AJIPHASE and AJICAP, and Forge's earnings inflection point.
• Whether price hikes, rolling-forecast management, and easing raw material costs in the food business lead to margin improvement in F3/28.
• Overseas seasonings sales growth, the yen exchange rate, and shareholder return policy.
• The direction of market consensus revisions to profit and EPS for F3/27 through F3/29.