Fujifilm Poised for Growth in Booming Digital Camera Market

Premium photography and imaging company, FUJIFILM Holdings Corporation FUJIY has lately proclaimed that it foresees year-over-year revenue growth of nearly 10% for fiscal 2018 (ending March 2018). Share price of the company moved north to $40.00, post the newsflash on Nov 16, 2017.

Over the last six months, shares of this Zacks Rank #3 (Hold) stock have returned 8.7% against the industry 13.8% decline.

Also, the stock currently has a VGM Score of A.

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The company perceives that its revenues and profitability will improve in the upcoming quarters on the back of stronger sales of high-end digital cameras.

The Camera & Imaging Products Association recently revealed that global camera shipments climbed nearly 13.6% to 18.9 million units in September from January. This has raised camera makers’ hopes of a surge in demand for high-value-added models.

Since 2010, the worldwide camera market has been witnessing a downward trend as end-users are defecting to smartphones. However, this year’s shipment data discloses that the markets are rebounding. One major stimulus behind the rally is the “The Instagram Effect.” This widely used photo-sharing application has largely driven sales of premium compact digital cameras, offering much better image than smartphones.

Industry View

Robust growth prospects have triggered business rivalry in the digital camera market. Fujifilm Holdings Corporation, Panasonic Corporation, Canon, Inc. CAJ, Sony Corporation SNE, Leica Camera AG, Nikon Corporation, Olympus Corporation and HP Inc. HPQ are the major players in this space.

In order to grab a larger portion of market demand, these camera makers are launching high-end models and have raised near-term top-line forecasts. For instance, Canon, Inc. anticipates year-over-year sales growth of 8% for 2017. The company noted that its compact digital cameras and interchangeable lenses are currently witnessing better-than-expected sales. Sony Corporation has raised its sales view by nearly 10.5% for fiscal 2018 (ending March 2018). Sony claims that demand for its Alpha mirrorless cameras has been improving in recent quarters. Nikon and Panasonic have also elevated their near-term sales guidance.

Fujifilm Riding High

In August, Fujifilm rolled out the VISION2019 program through which it intends to boost near-term profitability on the back of increased cash-flow generation, propel growth in prime business domains and develop new high-margin businesses. On the back of these, the company aims to generate revenues worth ¥2,600 billion, operating income of ¥230 billion and net income of ¥150 billion in fiscal 2020.

We believe that strategic business acquisitions (like the Wako Pure Chemical Industries Ltd. buyout in April 2017) and new operational-efficacy improving programs (such as the Work Style Innovation program) will boost the company’s top and bottom-line performance. 

Notably, Fujifilm predicts that the future of the digital camera industry is highly dependent on demand of major emerging countries such as China and India. In sync with this, the company intends to tap greater share of the Indian mirrorless camera demand by promoting its Fuji GFX system and premium range of X Series cameras, going forward. In addition, the company’s 4K broadcast lenses are likely to secure sturdy response in the county in the near future.

In the VISION2019 program, the company stated that its Imaging Solutions segment will generate roughly ¥380 billion revenues and ¥45 billion operating income by the end of fiscal 2020.

We believe that the aforementioned moves will largely help Fujifilm withstand competition in the high-end digital camera market. However, the photomask industry is highly dynamic in nature. The possibility of a rival outpacing competency with a new product or marketing strategy remains a concern.

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