We are maintaining our Neutral recommendation on Fujifilm Holdings Corporation (FUJIY).
We believe that the company’s continued focus on technological innovation will keep it abreast with the rapidly changing dynamics of the digital market. The company’s strong promotional efforts are also expected to increase sales and ensure significant value for shareholders.
The company’s margin management tactics are encouraging and looks to be beneficial for the long term. Its cost-effective business structure looks favorable for business growth and is anticipated to generate sustained profitability.
With a huge talent pool and enviable brand equity, Fujihas diversified itself overseas, especially in the emerging regions beyond the domestic photographic film market. Its sales bases include United States, Europe and larger parts of Asia. The company’s continued proactive investment in priority business fields looks significant as well.
However, Fuji’s unavoidable business risks remain nagging concerns for the company. Volatile prices of raw material like silver and aluminum raise input costs, thereby impacting margins. Also, asignificant portion of the company’s internationally generated income is exposed to exchange rate fluctuations.
Nevertheless, continued sluggishness in the European economy and slower-than-expected growth rate in the U.S. are expected to pose a threat. Even the domestic demand fluctuation continue to jeopardize Fuji’s earnings stream.
Moreover, cutthroat rivalry from competitors like Canon Inc. (CAJ); who have been continuously developing, launching and marketing hi-tech digital expertise; threatens the company’s traditional businesses. Also the risk of overcapacity in photo-imaging and photographic films sector depresses profit.
Currently, the company has a Zacks #4 Rank, implying a short-term (1-3 months) ‘Sell’ rating.
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