Ajinomoto stock hits record thanks to semiconductor material unit

TOKYO -- Japanese food and flavoring manufacturer Ajinomoto attained a record share price here Tuesday, as investors expressed a huge appetite for the company's semiconductor material business.

Ajinomoto gained 0.9% on the previous day to hit an intraday high of 4,357 yen ($31.46) before closing at 4,323 yen. The high beat the company's previous record of 4,350 yen, logged in March 1987.

The company's stock has climbed 24% since the end of last year. In contrast, the Nikkei Stock Average fell by 3% during the same period.

"The weight from institutional investors has grown somewhat," said Eiichi Mizutani, general manager of Ajinomoto's global finance department. "We're being purchased by growth investors."

The company's consolidated sales are projected to grow 19% to 1.36 trillion yen ($9.8 billion) for the current fiscal year ending March 2023. The net profit is on track for a 10% jump to 83 billion yen, with semiconductor materials providing the biggest driver of the earnings.

Ajinomoto, famous for its monosodium glutamate seasoning, expanded into the chipmaking material industry by repurposing its mainstay amino acid technology. It is also developing a biopharmaceutical segment.

The company's diversified organization has won confidence from investors. The non-food segments are forecasted to provide more than 40% of the overall business profit this financial year.

Ajinomoto generates more than 60% of its revenue abroad, so the weak yen is also providing a lift. And while its food segment has not been able to cover rising material costs through price hikes, earnings at the other segments are offsetting those challenges.

"They strengthened their business portfolio in part by getting rid of an unprofitable animal nutrition business," said Satoshi Fujiwara, research analyst at Nomura Securities. "Under cost inflation, they have the readiness to immediately raise prices."

When Ajinomoto achieved its last stock market record in 1987, the company had recently launched the anti-cancer drug Lentinan, which works by enhancing the immune system. The drug drew particular attention given its release during the AIDS epidemic.

But the stock price then declined, bottoming out at 625 yen in March 2009. Amid a slump in the amino acid industry, Ajinomoto turned in a net loss for fiscal 2008, when amino acids accounted for about 30% of its operating profit.

However, Ajinomoto's share price has become top-heavy as of late, suggesting overheated demand. The price-earnings ratio hovers at around 28, well above the Nikkei average of 13.