| Valuation method | Value, ¥ | Upside, % |
|---|---|---|
| Artificial intelligence (AI) | 4894.47 | 19 |
| Intrinsic value (DCF) | 1969.04 | -52 |
| Graham-Dodd Method | 1778.63 | -57 |
| Graham Formula | 3797.25 | -8 |
Sundrug Co., Ltd. is a leading Japanese drugstore chain specializing in pharmaceuticals, cosmetics, and general merchandise. Founded in 1957 and headquartered in Fuchu, Japan, the company operates a network of discount stores offering a wide range of products, including prescription drugs, over-the-counter medications, fresh food, home appliances, and alcoholic beverages. Sundrug’s business model combines convenience, affordability, and accessibility, catering to Japan’s aging population and growing demand for healthcare and wellness products. As part of Japan’s competitive drugstore sector, Sundrug differentiates itself through strategic store locations, competitive pricing, and a diversified product mix. The company’s strong presence in urban and suburban areas positions it well to capitalize on Japan’s retail pharmacy market, which benefits from regulatory support for self-medication and preventive healthcare. With a market capitalization of over ¥526 billion, Sundrug remains a key player in Japan’s healthcare and retail landscape.
Sundrug Co., Ltd. presents a stable investment opportunity with moderate growth potential in Japan’s resilient drugstore sector. The company benefits from consistent revenue streams (¥751.8 billion in FY2024) and strong profitability (¥29.1 billion net income), supported by a low beta (0.224), indicating lower volatility compared to the broader market. Its diversified product offerings and focus on cost efficiency contribute to healthy operating cash flow (¥41.2 billion). However, risks include intense competition in Japan’s crowded drugstore market and potential margin pressures from pricing regulations. The company’s dividend yield (¥130 per share) and solid cash position (¥69.7 billion) provide downside protection, but investors should monitor debt levels (¥35 billion) and capital expenditures (¥36.4 billion) for store expansions.
Sundrug competes in Japan’s highly fragmented drugstore industry, where differentiation is driven by pricing, store density, and product assortment. The company’s competitive advantage lies in its hybrid model combining pharmacy services with discount retail, allowing it to capture both healthcare and general merchandise demand. Its store locations—often near transit hubs and residential areas—enhance foot traffic, while private-label products improve margins. However, Sundrug faces stiff competition from larger rivals like Matsumotokiyoshi (Holdings) and Welcia, which benefit from greater scale and nationwide branding. Unlike specialty pharmacies, Sundrug’s broad product range mitigates reliance on prescription drug sales, but this also exposes it to competition from supermarkets and convenience stores. The company’s operational efficiency (evidenced by steady EPS growth to ¥249.06) helps maintain profitability, but its smaller store footprint compared to industry leaders limits bargaining power with suppliers. Regulatory tailwinds, such as Japan’s push for self-medication, could benefit Sundrug, but success hinges on its ability to optimize store productivity and expand high-margin services like dispensing pharmacies.