We maintain our Outperform recommendation on the ADR of Fujifilm Holdings Corporation (FUJIY) based on its strong business and expansion strategy into wider markets with innovative products. Further, Fuji’s cost and expense reduction techniques and its acquisition strategy are expected to boost both top-line and bottom-line results.
Fuji has been continuously developing innovative products that applied photographic film-related technologies in the medical (X-ray diagnosis), printing, electronic, imaging and magnetic materials field. Meanwhile, the company has penetrated overseas markets establishing sales bases in larger areas like United States, Europe and Asia, which are expected to provide greater momentum to the stock.
Fuji’s various structural reforms are yet another reason to Outperform. Recently, the company introduced ROA-based indicators to improve efficiency of its asset and capital utilization by reducing fixed assets and inventories. Management expects its ROA to more than double from 2.1% currently to approximately 5.0% in fiscal 2012. ROE is expected to be around 7.0% at the end of fiscal 2010. The restructuring programs would prove to be quite beneficial for the company in the long term considering clear signs of recovery in each business segment.
Fuji has also initiated cost and expense reduction techniques to improve its profitability. During fiscal 2010, the company recorded a 12% decrease in total cost and expenses. New high-quality products at much lower costs will prove profitable in future.
Thus, for fiscal 2011, management is expecting a 9% increase in revenue and anticipates the company to report net income of $667 million from a loss of $413.2 million in fiscal 2010.
FUJI PHOTO FILM (FUJIY): Free Stock Analysis Report
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