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On Wednesday, UBS adjusted its stance on Toyo Suisan Kaisha Ltd. (2875:JP) (OTC: TSUKF), shifting from a Buy to a Neutral rating and reducing the price target to ¥10,300 from the previous ¥12,300. The revision reflects a lowered target multiple and minor alterations to the firm's estimates.
The company, known for its production of instant noodles, initiated a ¥25 billion share buyback program in June, a move interpreted as an effort to show its commitment to shareholder engagement. UBS now expects Toyo Suisan to maintain buybacks, assuming a 50% total payout ratio.
UBS has raised concerns about the increasing competition in the U.S. instant noodle market, where recent data has shown a drop in unit prices. This trend suggests a potential slowdown in the demand growth for instant noodles, which had seen a surge during the recession.
The market's anticipation of heightened competition comes at a time when Toyo Suisan and its industry counterparts are planning to expand production in the fiscal year ending March 2026. This landscape presents a challenging scenario for the company as it navigates through the evolving market dynamics.
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