Kobe, was founded in 1985 and is headquartered in Hyogo, Japan. Its main operations include food retailing, managing supermarkets and food services, and finally renewable energy. Its core products and services include food retail, prepared foods and eco-friendly energy solutions. The company operates four business lines: Gyomu Super, Restaurant & Delicatessen, and Eco Renewable Energy.
Efficiency expansion drive
Kobe announced the construction of a new 19,000 sq metre, four-storey Funabashi Distribution Center in Chiba for 15bn Japanese Yen, fully funded through internal resources. The facility will handle refrigerated, frozen, and cool storage for the company, optimize Kanto-area logistics, and will reduce its warehousing and transport costs by approximately JPY 1.5bn annually. In addition, this move is expected to enhance price competitiveness, improve customer retention and facilitate long-term growth.
Strong FCF growth
Kobe posted strong performance over FY 21-24, achieving a revenue CAGR of 11.9%, reaching JPY 508bn in FY 24, driven by aggressive store expansion and rising demand for discount retail. EBITDA registered a CAGR of 8.8%, reaching JPY 40.5bn. However, its EBITDA margin declined from 8.7% to 8%.
Over FY 21-24, FCF grew sharply - from JPY 649m to JPY 15bn - supported by decent growth in cash flow from operations, from JPY 21.3bn to JPY 30.8bn. Cash and cash equivalent almost doubled from JPY 57.8bn to JPY 107.0bn. In addition, its gearing ratio improved from 44.4% to 27.9%.
Over the first nine months of FY 25, the company posted steady revenue growth, driven by improved customer attraction, supported by new stores and shops opening, strong media coverage, and menu innovations. In addition, the operating margin expanded by 300bp.
In comparison, Seven & i Holdings Co., Ltd., a major local peer, reported a slightly lower revenue CAGR of 11% over FY 21-24, albeit reaching a much higher JPY 12.0tn in FY 24. EBITDA grew at CAGR of 9.8% to JPY 996bn. However, its (fairly similar) EBITDA margin contracted from 8.6% to 8.3%.
Optimistic outlook
Over the past year, the company's stock has delivered returns of 5.1%. In comparison, Seven & i posted negative returns of 15.9%. The company paid an annual dividend of JPY 23 in FY 24, resulting in a dividend yield of 0.6%.
Kobe is currently trading at a P/E of 29.5x, based on the FY 25 estimated EPS of JPY 131.2, which is lower than its 3-year historical average of 37.4x but higher than Seven & i’s valuation of 20.3x. The company is currently trading at an EV/EBITDA multiple of 16.7x, based on FY 25 estimated EBITDA of JPY 46.3bn, which is lower than its 3-year historical average of 20.1x, but higher than Seven & i (7.9x).
Kobe is monitored by six analysts, with two having ‘Buy’ ratings and four having ‘Hold’ ratings for an average target price of JPY 4,367.1, implying an upside of 12.9% over the current market price.
The analysts’ views are supported by an estimated EBITDA CAGR of 11.0% to JPY 55.8bn with margin expansion of 76bp to 8.8% over FY 24-27. In addition, analysts estimate a net profit CAGR of 15.9% to JPY 33.4bn. Likewise, for Seven & i, the analysts estimate an EBITDA CAGR of -1.8% and a net profit CAGR of 16.7% over FY 24-27.
Overall, Kobe demonstrated resilient growth through effective expansion and is well-positioned for strong performance supported by efficiency gains, robust demand, and a positive long-term outlook. However, it may face risks from fluctuating consumer demand, supply chain disruptions, and intensifying competition.
