Entering text into the input field will update the search result below

FUJIFILM Holdings: Beginning To Deliver On Healthcare Diversification

Karreta Advisors profile picture
Karreta Advisors


  • We have assessed FUJIFILM's transition to date as a healthcare business. The conclusion is that they have made material progress, and the outlook is positive.
  • The secular decline in office equipment business needs to be managed, but healthcare should continue to scale via M&A and capex to generate growth overall.
  • With the shares trading on PER FY3/2022 15.9x and a free cash flow yield of 5.9%, we are buyers of the shares.

Investment thesis

FUJIFILM (OTCPK:FUJIY) is positioned for improving profitability and sustained free cash flow generation, as it continues to scale its operations in healthcare. The shares do look cheap on PER FY3/2022 15.9x and a free cash flow yield of 5.9%.

Quick primer

Established in 1934, FUJIFILM is a fine chemical manufacturer spun out of Daicel (OTCPK:DACHF) producing photographic film. It has been expanding into healthcare, focusing on expansion as a contract development and manufacturing organization.

Our objective

We would like to assess how FUJIFILM's expansion strategy into healthcare has delivered in terms of:

  • Acting as a successful exit plan from legacy imaging and document businesses.
  • Whether it has been successful in raising overall returns for the business.

We will take each one in turn.

Exit from legacy

FUJIFILM has not been idle in the face of digitization. As the core imaging business compromising of photographic film and paper was down-scaled, the company embarked on diversifying into healthcare and life science businesses. A major strategic move was the acquisition of biopharmaceutical business Merck BioManufacturing Network in 2011, a leading contract development and manufacturing organization (CDMO) for biologics, viral vaccines and vectors.

Sales split FY3/2020

FUJIFILM sales split FY3/2020

Source: Company, created by author

As the healthcare segment of the business grew, the profitability of the business began to recover.

Operating margin trend

FUJIFILM operating margin trend

Source: Company, created by author

That being said, the return on equity (ROE) has also improved but remains quite low. This is partly as a result of an over-capitalized balance sheet, which has enabled smooth M&A activity.

ROE trend


Source: Company, created by author

The company has effectively run down its Imaging business, but the Document Solutions despite digitization headwinds continues to act as a cash cow. The failed acquisition attempt Xerox (XRX) in 2018 has ultimately led to the

This article was written by

Karreta Advisors profile picture
We are an independent research house. We look at global stocks, favoring those with sustainable growth and recognized or emerging as a high quality franchise at suitable valuations. We primarily serve institutional investors.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.