UBS Raises House Foods Price Target on Potential Ichibanya Sale, Capital Reforms

UBS has raised its price target on House Foods (TYO:2810) to ¥5,000 from a previous ¥3,900, anticipating a major corporate restructuring centered on the potential sale of its stake in the Ichibanya restaurant chain and a renewed focus on capital efficiency. The brokerage reiterated its "buy" rating on the stock.

Rationale for the Upgrade

The revised outlook is primarily driven by UBS's expectation that House Foods will sell its 51% stake in Ichibanya during fiscal year 2028. According to the bank's analysis, this move is part of a broader strategic shift by management, which has acknowledged that the company's return on equity (ROE) has consistently been below its cost of equity.

UBS projects the proceeds from the sale would be returned to shareholders through substantial share buybacks. The bank's model now includes:

• ¥26 billion in buybacks in fiscal 2027
• ¥100 billion in buybacks in fiscal 2028
• ¥30 billion annually from fiscal 2029 onwards

Financial Projections and Market Impact

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Reflecting these potential changes, UBS significantly increased its earnings per share (EPS) forecasts for House Foods by 5% for fiscal 2027, 118% for fiscal 2028, and 25% for fiscal 2029. The bank forecasts that the company's ROE will improve from 4.1% in fiscal 2027 to 8.3% by fiscal 2030 as the business reforms and shareholder returns take effect.

UBS analysts noted that the current share price does not appear to factor in the potential Ichibanya sale or the subsequent large-scale buybacks. Even with the increased shareholder returns, the brokerage expects House Foods to maintain a net cash position.

Potential for Further Restructuring

Beyond the Ichibanya divestment, UBS sees scope for further restructuring as House Foods narrows its focus on its core spice value chain. The bank identified other assets that could be reviewed for potential sale, including the loss-making U.S. tofu business and real estate assets like the Tokyo head office and the Itami plant.

While these potential disposals are not included in UBS's base case scenario, they represent additional opportunities for the company to unlock value and generate further cash proceeds. On Monday, shares of House Foods rose 0.72% to ¥4,056, as cited by Investing.com.