Nichirei Ltd

Nichirei Corporation (2871.TYO) is a leading Japanese producer of frozen and processed food products, as well as being a national leader in cold storage warehouses. Nichirei is based out of Tokyo, and was established back in 1942 as a processed seafood producer. Despite being mainly known for its frozen food products, Nichirei actually has a very diverse corporate portfolio that includes:

  • Nichirei Fresh for fresh meats and seafood
  • Nichirei Foods for the processed and frozen food products
  • Nichirei Logistics for the cold storage 
  • Nichirei Corporation which also includes a budding real estate business
  • Nichirei Biosciences manufacture cell reagents for cosmetics

Remember that since Nichirei trades on the Tokyo stock exchange, its figures are portrayed in Japanese Yen. It has a market cap of 389 billion yen, which is the equivalent of approximately $3.55 billion USD. According to its 2020 Investor presentation, Nichirei recorded 584.9 billion yen in net sales and 31 billion yen in operating profit. This gives Nichirei a very attractive price to sales ratio of below 1, meaning investors could be getting a discount right now in terms of future growth. Learn more

Nichirei Stock Analysis: It is always a benefit to be invested in the top dog and industry leader, and Nichirei can boast being the top domestic brand in frozen food sales, as well as in cold storage capacity. In fact, as of 2020, Nichirei ranked sixth in the world in cold storage capacity, and operated refrigerated warehouses in international markets like Thailand, Malaysia, China, and throughout continental Europe.

Nichirei’s frozen and processed food business is second to none in Japan, a country in which a high percentage of single people either eat at restaurants or cook these processed, frozen foods for a quick meal. Nichirei outpaces popular brands such as Ajinomoto which is famous for its MSG seasoning salts, Nippon Suisan, and Maruha Nichiro, both of which specialize in frozen and canned seafood products.

Nichirei has been successful at attacking Japanese consumers at grocery stores with a multi-pronged attack. While Nichirei Fresh provides fresh meats and seafood that are sold at the butcher and fish monger stands, Nichirei Foods dominates the ready-made and frozen food sections. Finally, in a feature that is more common in Japan than in the rest of the world, most grocery stores offer a delicatessen area of the restaurant where customers can order hot food prepared on the spot. It is a very aggressive strategy that shows that Nichirei is relentless in targeting a wide range of consumers from those who just want hot food from the delicatessen, to those who have time to buy fresh meat and seafood to cook meals at home.

Is Nichirei a good investment? The financials are rock solid, with a price to sales ratio of 0.68 and a stable balance sheet. Nichirei creates enough free cash flow to provide a small dividend to its investors, with a 1.74% forward yield. Nichirei is known for packaged foods, but it’s cold storage logistics and biosciences divisions have it operating as an industrial conglomerate. With so many different revenue streams, Nichirei has a strong foundation to provide ample growth moving forward, with a small dividend as a nice reward to shareholders.

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