Shiseido Faces Steepest Cut in Target Price on Weak China Demand

Analysts are slashing target prices on Shiseido Company after weak demand in China caused the Japanese cosmetics company to trim earnings forecasts, dragging shares toward their steepest annual loss on record.

Shiseido’s average target price has fallen 13 percent over the past month, the most among Japanese companies with a market cap greater than ¥1.5 trillion ($10 billion), according to data compiled by Bloomberg. SMBC Nikko Securities Inc. cut its target by 34 percent on Monday, following downgrades from Sanford C. Bernstein & Co. and Daiwa Securities Group Inc. in November.

The stock is set for an unprecedented annual drop of 38 percent after the company reduced its full-year profit forecast in November on slower demand from China, following the release of treated radioactive wastewater at Fukushima in August. Pressure on earnings has been worse than expected on China’s economic slowdown, Fukushima’s water issues and prolonged travel retail inventory adjustments, SMBC Nikko analyst Shima Yamanaka wrote in a note.

Shiseido’s slump over recent months places it among the most oversold stocks in the cosmetics sector, Goldman Sachs strategists including Bruce Kirk wrote in a note. Still, conditions are sensitive to China sentiment, which could change quickly on any stimulus or policy shifts, they wrote.

By Winnie Hsu

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