Stock Analysis & Valuation Earth Corporation (4985.T)

• Previous Close: ¥4,890.00
• Sector Valuation Confidence Level: Low

Valuation method	Value, ¥	Upside, %
Artificial intelligence (AI)	5673.64	16
Intrinsic value (DCF)	2450.73	-50
Graham-Dodd Method	2098.33	-57
Graham Formula	2346.34	-52

Strategic Investment Analysis

Company Overview

Earth Corporation (4985.T) is a leading Japanese manufacturer and marketer of pharmaceutical products, quasi-drugs, medical tools, and household essentials. Founded in 1892 and headquartered in Tokyo, the company operates through two key segments: Household Products and General Environment & Sanitation. Earth Corporation is renowned for its diverse portfolio of insecticides, repellents, gardening supplies, pet care products, and hygiene solutions, marketed under well-known brands such as Earth Red, Polident, Sensodyne, and Cleverin. The company serves both domestic and international markets, emphasizing innovation in pest control, oral care, and home sanitation. With a strong legacy and a broad product range, Earth Corporation plays a vital role in Japan's consumer defensive sector, catering to everyday household and personal care needs while maintaining a steady demand profile due to its essential product offerings.

Investment Summary

Earth Corporation presents a stable investment opportunity within the consumer defensive sector, supported by its diversified product portfolio and established brand presence. The company's low beta (0.136) indicates lower volatility relative to the market, appealing to risk-averse investors. However, its modest net income (JPY 3.48 billion) and operating cash flow (JPY 13.96 billion) suggest limited growth momentum. The dividend yield is attractive, with JPY 238 per share, but investors should monitor competitive pressures in the household and personal care segments, as well as potential margin constraints from rising input costs. The company's strong cash position (JPY 16.78 billion) and manageable debt (JPY 5 billion) provide financial flexibility, but revenue growth has been sluggish, reflecting challenges in expanding beyond its core markets.

Competitive Analysis

Earth Corporation holds a niche but stable position in Japan's household and personal care industry, leveraging long-standing brands like Earth Red and Polident. Its competitive advantage lies in its deep domestic distribution network and brand loyalty, particularly in insecticides and oral care. However, the company faces intense competition from global giants with broader R&D capabilities and economies of scale. While Earth Corporation's focus on quasi-drugs and hygiene products provides some insulation from pure-play FMCG rivals, its international presence is limited compared to multinational peers. The company's strength in pest control and niche household products helps maintain steady demand, but innovation in adjacent categories (e.g., eco-friendly solutions) lags behind larger competitors. Pricing power is moderate, given the commoditized nature of many household goods, and the company's reliance on the Japanese market exposes it to demographic headwinds like population decline.

Major Competitors

• Shiseido Company (4911.T): Shiseido dominates Japan's premium personal care market with global brands like NARS and Clé de Peau. Its strengths include strong innovation in cosmetics and skincare, but it lacks Earth Corporation's focus on household insecticides and quasi-drugs. Shiseido's international reach far exceeds Earth's, though its exposure to luxury segments makes it more cyclical.
• Kao Corporation (4452.T): Kao is a formidable competitor in household and personal care with brands like Attack (detergents) and Bioré (skincare). Its diversified portfolio and strong R&D capabilities pose a challenge to Earth's niche products. However, Kao's larger scale allows for better cost efficiency, while Earth retains an edge in specialized pest control solutions.
• Nitto Denko Corporation (6988.T): Nitto Denko competes indirectly in hygiene and medical materials through its adhesive and film technologies. While not a direct household products rival, its innovation in functional materials could disrupt segments like Earth's sanitation business. Earth's brand recognition in consumer-facing categories remains a key differentiator.
• Procter & Gamble (PG): P&G's global scale and powerhouse brands (e.g., Tide, Oral-B) overshadow Earth's domestic-focused operations. P&G's oral care and home care segments compete directly with Earth's Polident and cleaning products, but Earth's localized insecticide expertise provides a regional counterbalance. P&G's vast marketing budget is a persistent competitive threat.
• Reckitt Benckiser (RBGPF): Reckitt's Lysol and Dettol brands compete with Earth's hygiene products, particularly in disinfectants and air fresheners. Reckitt's global distribution and aggressive marketing outpace Earth's capabilities, though Earth's deep understanding of Japanese consumer preferences helps retain loyal customers in niche categories like mosquito coils.