PSA Fujifilm Holdings (4901) – A Picture of Improving Health
Fujifilm Holdings (4901) – A Picture of Improving Health
Fujifilm shares underperformed from April to July after compliance issues emerged at Fuji Xerox. Management is addressing those issues, and stronger than expected earnings appear capable of supporting improved performance by the shares. We estimate FY17 OP of ¥199.6bil vs. guidance of ¥185.0bil and consensus of ¥195.5bil; for FY18 we estimate ¥220.2bil vs. consensus of ¥213.0bil.
Fujifilm’s medium-term plan focuses on healthcare and highly functional materials. The company is exploring out-licensing opportunities for pharma and expanding its presence in biopharma and regenerative medicine. Electronic materials are benefiting from strong IC markets while OLED products are gaining traction. Management plans to channel annual free cash flow of at least ¥120bil into shareholder returns and M&A. On August 30th the company announced a buyback of up to 3.7% of outstanding shares for as much as ¥50bil.
Key Points
- Imaging Solutions OP surged by 2.2x YoY in Q1 to ¥12.6bil on strong sales of instant cameras and new mirrorless camera introductions.
- Fuji Xerox’s FY17 H2 should improve as operations in Oceania normalize and shipments to Xerox Corp (US) gain momentum.
- Our FY17 forecasts are ahead of both the company and current consensus estimates.
- Valuations do not appear demanding, although this partly reflects single-digit ROE. We estimate a FY17 PER of 15.8x, PBR of 1.0x and EV/OP of 9.3x. On a cash-adjusted basis, we estimate that FY17e ROE would be 9.7% instead of 6.7%.
FUJIFILM Holdings is a holding company engaged in the manufacture and sale of imaging information products. Co.'s principal businesses are divided into three segments: imagining solution, information solution and document solution. Co.'s principal products and services are color films, digital cameras "FinePix," photofinishing equipment, color paper, as well as chemicals and services for photofinishing; equipment and materials for medical systems and life sciences, equipment and materials for graphic arts, flat panel display materials, recording media and optical devices; office copy machines/MFPs, printers, as well as production systems and services.
Founded in 2009, Pelham Smithers Associates (PSA) provides market intelligence on Asian technology, focusing in particular on Japan. The industries covered by our team of specialists are: consumer electronics, telecomms, pharmaceuticals, internet, electronic parts and materials, automotive technology, retail and capital goods.
PSA produces both company and sector reports. The focus of PSA’s research is to identify winners and losers as new technologies impact the top and bottom lines of corporations. Critical to our research is the clear explanation of how these new technologies work and how they impact companies and industries.
The founding partners have worked closely together for twenty years and the team has more than doubled in size since 2012.
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