jp morgan equity research

www.jpmorganmarkets.com

Asia Pacific Equity Research

14 August 2015

Fuji Electric (6504)

NeutralPrevious: Overweight

6504.T, 6504 JT

Downgrade to Neutral on Achievement of Price TargetPrice: 557

Price Target: 570

Japan Equity Research

Electronics/Precision & Industrial

Hisashi Moriyama AC

(81-3) 6736-8601

[email protected]

Bloomberg JPMA MORIYAMA

JPMorgan Securities Japan Co., Ltd.

YTD 1m 3m 12m

Abs 15.1% 8.8% -3.3% 8.8%

Rel -3.4% 5.4% -7.3% -23.4%

Fuji Electric Co., Ltd. (Reuters: 6504.T, Bloomberg: 6504 JT)

2014/3 2015/3 2016/3 E 2017/3 E 2018/3 E

Sales ( mn) 759,911 810,678 850,000 914,000 966,000

Operating Profit ( mn) 33,136 39,316 46,000 50,000 55,500

Recurring Profit ( mn) 36,731 43,139 47,000 51,000 56,500

Net Profit ( mn) 19,582 27,978 29,700 32,100 37,550

EPS () 27.40 39.15 41.56 44.92 52.54

BPS () 317.88 447.24 484.60 525.32 573.67

ROE 9.3% 10.2% 8.9% 8.9% 9.6%

P/E (x) 20.3 14.2 13.4 12.4 10.6

P/BV (x) 1.8 1.2 1.1 1.1 1.0

EV/EBITDA (x) 9.4 7.7 7.2 4.6 4.7

Source: Company data, Bloomberg, J.P. Morgan estimates.

Company Data

Price () 557

Date Of Price 12 Aug 15

Market Cap ( bn) 398.08

Market Cap ($ bn) 3.20

Shares O/S (mn) 715

52-week Range () 617-421

TOPIX 1,665.75

DPS () 10.00

Dividend Yield 1.8%

ROE 8.9%

Price Target () 570

Price Target End Date 30-Dec-16

See page 9 for analyst certification and important disclosures, including non-US analyst disclosures.

J.P. Morgan does and seeks to do business with companies covered in its research reports. As a result, investors should be aware that

the firm may have a conflict of interest that could affect the objectivity of this report. Investors should consider this report as only a single

factor in making their investment decision.

400

500

600

700

Aug-14 Nov-14 Feb-15 May-15 Aug-15

Price Performance

6504.T share price ()

TOPIX (rebased)

Operating profit beat guidance by around 2 billion in April-June, mainly thanks

to cost cutting. Earnings were strong in the power electronics segment, which

includes drive systems, thanks to growth in demand for inverters, servos and

rotary equipment. Profit was down marginally in electronic devices, because of a

decline in the number of auto models in which the companys power devices were

used and the macro-economic slowdown in China. Fixed costs will rise

temporarily this fiscal year due to investment in the new technology development

facility at Suzuka. While we expect earnings to remain strong, the share price is

already within our target range, so we downgrade the stock to Neutral.

Earnings beat in April-June due to cost cutting: Earnings were strong in the

power generation and social infrastructure segment (20% of operating profit);

declined in the industrial infrastructure segment (27%), due to an absence of big

power transformer projects; were strong in the power electronics segment

(21%); declined in semiconductors in the electronic devices segment (22%) but

rose in disk media due to the situation at customers; and declined in Japan but

rose in China in the food and beverage distribution segment (19%).

Investing in medium-term growth of power electronics: R&D spending is

budgeted to grow by 4.4 billion overall in FY2015, due to forward looking

investment in the new technology development facility at Suzuka. Of the 7.9

billion growth budgeted for capital expenditure, 3.1 billion will go on power

electronics. Management posits this fiscal year as a period of forward looking

investment in improving the competitiveness of power electronics. Demand for

mega-solar systems had declined, but we see strong latent demand in the thermal

power generation, geothermal and hydropower businesses.

Maintain price target of 570; downgrade to Neutral: Our price target

equates to an FY2015 EV/EBITDA of 7.2x based on our forecasts (P/E of

13.7x). It derives from a sum-of-the-parts methodology that discounts the

average FY2015 EV/EBITDA of 7.4x (previously 8.1x) by 0.2pt (0.9pt) to allow

for the risks of slowdowns in orders and the macro-economy. We also extend

the period for our achievement of our price target from December 2015 through

December 2016.

2Asia Pacific Equity Research

14 August 2015


Hisashi Moriyama

(81-3) 6736-8601

[email protected]

Fuji Electric (6504)

Company Profile

Japans fourth-largest heavy electrical equipment

manufacturer. Established in 1923. Focusing on

environment/energy-related equipment such as power

generation equipment (thermal, geothermal), inverters, power

semiconductors).

FY2014 Sales Composition

%

Source: J.P. Morgan estimates. *Excluding Eliminations.

Investment Thesis Risk Analysis

Upside Scenario to Target Price/Rating

Earnings from inverters and power semiconductors could

overshoot thanks to accelerated Capex in Asia and China.

Downside Scenario to Target Price/Rating

Earnings from power semiconductors could undershoot

owing to increased competition and inventory

adjustments.

Operating Profit Forecasts: J.P. Morgan versus Consensus

billion

J.P. Morgan Consensus

FY2015E 46.0 41.7

FY2016E 50.0 46.7

Source: J.P. Morgan estimates, Bloomberg.

Valuation

Maintain price target of 570. Our price target equates to an

FY2015 EV/EBITDA of 7.2x based on our forecasts (P/E of

13.7x). It derives from a sum-of-the-parts methodology that

discounts the average FY2015 EV/EBITDA of 7.4x

(previously 8.1x) by 0.2pt (0.9pt) to allow for the risks of

slowdowns in orders and the macro-economy. We also

extend the period for our achievement of our price target

from December 2015 through December 2016.

Assumptions & Sensitivity Metrics (Impact on FY2015 Profits)

Factor Company J.P.Morgan Impact

Assumption OP (mn)

/$ rate 115 120 1/$ 90

/Euro rate 125 132 1/Euro 70

Source: Company

Peer Valuations Based on Bloomberg Consensus

Bloomberg Market Cap P/E(x) P/B(x) ROE(%)

Company name Ticker Currency Price Date ($mn) 15E 16E 17E 15E 16E 17E 15E

Fuji Electric Co Ltd 6504 JT JPY 557 Aug-12 3,346 13.2 12.0 11.0 1.28 1.18 1.07 10.0

Hitachi Ltd 6501 JT JPY 770 Aug-12 29,930 10.9 9.8 9.0 1.16 1.06 0.97 10.5

Toshiba Corp 6502 JT JPY 370 Aug-12 12,627 -1833.2 8.4 7.7 1.28 1.07 0.96 4.7

Mitsubishi Electric 6503 JT JPY 1,341 Aug-12 23,170 12.5 11.7 11.0 1.44 1.31 1.20 12.0

Rockwell Automation ROK US USD 115.84 Aug-12 15,535 17.5 16.6 15.2 5.88 5.46 5.15 32.8

Siemens SIE GR EUR 96.25 Aug-12 76,056 14.9 13.8 12.6 2.49 2.31 2.09 20.5

Schneider Electric SU FP EUR 60.73 Aug-12 32,006 15.4 13.8 12.5 1.69 1.63 1.54 10.6

Source: Bloomberg. Note: Market caps are calculated using forex rates as of August 12.

Energy and

Social infra

25%

Industrial

Infrastructure

23%

Power

Electronics

21%

Electronic

Devices

16%

Food &

Beverage

Distribution

13%

Others

7%


14 August 2015


Hisashi Moriyama

(81-3) 6736-8601

[email protected]

Figure 1: Sales by Segment (Annual)

million, %

2014/3 2015/3 2016/3E 2016/3E 2017/3E 2017/3E 2018/3E 2018/3E 2016/3CoE 2016/3CoE

old new old new old new 4/27 7/30

Sales by segment

Power & Social Infrastructure 152,321 169,200 176,600 178,100 189,000 187,900 202,000 192,900 176,600 178,100

Power Plant 71,600 79,500 88,300 88,300 95,000 95,000 100,000 100,000 88,300 -

Social Engineering Systems 30,500 40,600 38,900 40,400 40,000 40,400 48,000 40,400 38,900 -

Social Information 50,300 49,100 52,000 49,400 54,000 52,500 54,000 52,500 49,400 -

Industrial Infrastructure 189,548 191,400 208,600 209,100 220,000 220,400 238,000 238,400 208,600 209,100

Transmission and Distribution 51,200 53,600 58,400 58,400 60,000 60,000 65,000 65,000 58,400 -

Machinery and Electronics 41,700 42,100 52,200 52,600 55,000 55,400 55,000 55,400 52,200 -

Instrumentation and Control 43,600 42,100 35,500 35,500 40,000 40,000 50,000 50,000 35,500 -

Equipment Construction 53,100 55,500 62,600 62,600 65,000 65,000 68,000 68,000 62,600 -

Power Electronics 174,745 200,900 219,500 219,500 228,000 228,700 238,000 238,700 219,500 219,500

Drive 69,900 78,400 85,600 85,600 90,000 90,000 95,000 95,000 85,600 -

Power Supply 33,200 40,200 57,100 57,100 60,000 60,700 65,000 65,700 57,100 -

ED&C Components 71,600 82,400 76,800 76,800 78,000 78,000 78,000 78,000 76,800 -

Electronic Devices 123,049 137,189 137,300 135,300 159,000 159,000 171,000 171,000 137,300 135,300

Semiconductor 99,700 108,400 111,200 109,200 132,000 132,000 143,000 143,000 111,200 -

Magnetic Disks 23,400 28,800 26,100 26,100 27,000 27,000 28,000 28,000 26,100 -

Food & Beverage Distribution 120,056 119,113 120,000 120,000 133,000 133,000 140,000 140,000 120,000 120,000

Vending Machines 74,400 72,700 64,800 62,800 75,000 73,000 80,000 78,000 64,800 -

Store Distribution 45,600 46,500 55,200 57,200 58,000 60,000 60,000 62,000 55,200 -

Others 59,998 61,203 61,400 61,400 60,000 60,000 60,000 60,000 61,400 61,400

Elimination -59,808 -68,300 -73,400 -73,400 -75,000 -75,000 -75,000 -75,000 -73,400 -73,400

Total Sales 759,911 810,678 850,000 850,000 914,000 914,000 974,000 966,000 850,000 850,000

YoY 1.9% 6.7% 4.9% 4.9% 7.5% 7.5% 6.6% 5.7% 4.9% 4.9%

Power & Social Infrastructure -2.9% 11.1% 0.8% 5.3% 7.0% 5.5% 6.9% 2.7% 0.8% 5.3%

Industrial Infrastructure -4.6% 1.0% 5.3% 9.2% 5.5% 5.4% 8.2% 8.2% 5.3% 9.2%

Power Electronics 17.8% 15.0% 19.2% 9.3% 3.9% 4.2% 4.4% 4.4% 19.2% 9.3%

Electronic Devices 8.3% 11.5% 0.1% -1.4% 15.8% 17.5% 7.5% 7.5% 0.1% -1.4%

Food & Beverage Distribution 7.1% -0.8% 0.7% 0.7% 10.8% 10.8% 5.3% 5.3% 0.7% 0.7%

Others -1.0% 2.0% 0.3% 0.3% -2.3% -2.3% 0.0% 0.0% 0.3% 0.3%

Elimination 34.5% 14.2% 14.3% 7.5% 2.2% 2.2% 0.0% 0.0% 14.3% 7.5%

Source: Company data, J.P. Morgan estimates, segment breakdowns are J.P. Morgan estimates


14 August 2015


Hisashi Moriyama

(81-3) 6736-8601

[email protected]

Figure 2: OP by Segment (Annual)

million, %

2014/3 2015/3 2016/3E 2016/3E 2017/3E 2017/3E 2018/3E 2018/3E 2016/3CoE 2016/3CoE

old new old new old New 4/27 7/30

OP by segment

Power & Social Infrastructure 7,659 7,800 9,000 9,000 10,000 10,000 11,500 11,500 8,400 8,900

Industrial Infrastructure 9,624 11,100 12,500 12,500 13,500 13,500 14,500 14,500 12,500 13,000

Power Electronics 5,331 7,600 9,600 9,600 10,000 10,000 11,000 11,000 9,600 9,600

Electronic Devices 6,472 8,071 10,300 10,300 12,000 12,000 14,000 14,000 10,300 9,300

Semiconductor 5,800 7,300 8,300 8,300 10,000 10,000 12,000 12,000 8,300 -

Magnetic Disks 600 800 2,000 2,000 2,000 2,000 2,000 2,000 2,000 -

Food & Beverage Distribution 8,047 8,527 8,800 8,800 9,000 9,000 9,000 9,000 8,500 8,500

Others 1,912 1,882 1,900 1,900 2,000 2,000 2,000 2,000 1,900 1,900

Elimination -5,909 -5,676 -6,100 -6,100 -6,500 -6,500 -6,500 -6,500 -6,100 -6,100

Total OP 33,136 39,316 46,000 46,000 50,000 50,000 55,500 55,500 45,000 45,000

OPM by segment

Power & Social Infrastructure 5.0% 4.6% 5.1% 5.1% 5.3% 5.3% 5.7% 6.0% 4.8% 4.8%

Industrial Infrastructure 5.1% 5.8% 6.0% 6.0% 6.1% 6.1% 6.1% 6.1% 6.0% 6.0%

Power Electronics 3.1% 3.8% 4.4% 4.4% 4.4% 4.4% 4.6% 4.6% 4.4% 4.4%

Electronic Devices 5.3% 5.9% 7.5% 7.6% 7.5% 7.5% 8.2% 8.2% 7.5% 7.5%

Semiconductor 5.8% 6.7% 7.5% 7.6% 7.6% 7.6% 8.4% 8.4% - -

Magnetic Disks 2.6% 2.8% 7.7% 7.7% 7.4% 7.4% 7.1% 7.1% - -

Food & Beverage Distribution 6.7% 7.2% 7.3% 7.3% 6.8% 6.8% 6.4% 6.4% 7.1% 7.1%

Others 3.2% 3.1% 3.1% 3.1% 3.3% 3.3% 3.3% 3.3% 3.1% 3.1%

Elimination 9.9% 8.3% 8.3% 8.3% 8.7% 8.7% 8.7% 8.7% 8.3% 8.3%

Total OPM 4.4% 4.8% 5.4% 5.4% 5.5% 5.5% 5.7% 5.7% 5.3% 5.3%

OP breakdown

Power & Social Infrastructure 23% 20% 20% 20% 20% 20% 21% 21% 19% 19%

Industrial Infrastructure 29% 28% 27% 27% 27% 27% 26% 26% 28% 28%

Power Electronics 16% 19% 21% 21% 20% 20% 20% 20% 21% 21%

Electronic Devices 20% 21% 22% 22% 24% 24% 25% 25% 23% 23%

Semiconductor 90% 90% 18% 18% 20% 20% 22% 22% 18% 18%

Magnetic Disks 10% 10% 4% 4% 4% 4% 4% 4% 4% 4%

Food & Beverage Distribution 24% 22% 19% 19% 18% 18% 16% 16% 19% 19%

Others 6% 5% 4% 4% 4% 4% 4% 4% 4% 4%

Elimination -18% -14% -13% -13% -13% -13% -12% -12% -14% -14%

Source: Company data, J.P. Morgan estimates, segment breakdowns are J.P. Morgan estimates


14 August 2015


Hisashi Moriyama

(81-3) 6736-8601

[email protected]

Figure 3: Income Statement (Annual)

million, %

2014/3 2015/3 2016/3E 2016/3E 2017/3E 2017/3E 2018/3E 2018/3E 2016/3CoE

old new old new old new 7/30

Sales 759,911 810,678 850,000 850,000 914,000 914,000 974,000 966,000 850,000

COGS 579,857 609,376 646,750 634,000 694,910 681,200 738,310 717,300

GP 180,055 201,302 203,250 216,000 219,090 232,800 235,690 248,700

SG&A 146,918 161,985 157,250 170,000 169,090 182,800 180,190 193,200

Total OP 33,136 39,316 46,000 46,000 50,000 50,000 55,500 55,500 45,000

Non-OP 7,170 8,321 4,800 5,500 4,800 5,500 4,800 5,500

Non-OP expense 3,576 4,499 3,800 4,500 3,800 4,500 3,800 4,500

RP 36,731 43,139 47,000 47,000 51,000 51,000 56,500 56,500 45,000

Extra ordinary profit 913 7,703 0 0 0 0 0 0

Extra ordinary loss 3,907 5,123 2,000 2,000 2,000 2,000 2,000 2,000

Pre tax income 33,737 45,719 45,000 45,000 49,000 49,000 56,500 56,500

Taxes 11,982 14,918 13,500 13,500 14,700 14,700 16,950 16,950

Minority interest 2,172 2,822 1,800 1,800 2,200 2,200 2,000 2,000

Net profits 19,582 27,978 29,700 29,700 32,100 32,100 37,550 37,550 29,000

% to Sales

COGS 76.3 75.2 76.1 74.6 76.0 74.5 75.8 74.3

GP 23.7 24.8 23.9 25.4 24.0 25.5 24.2 25.7

SG&A 18.5 18.5 18.5 20.0 18.5 20.0 18.5 20.0

Total OP 4.4 4.8 5.4 5.4 5.5 5.5 5.7 5.7 5.3

RP 4.8 5.3 5.5 5.5 5.6 5.6 5.8 5.8 5.3

Pre tax income 4.4 5.6 5.3 5.3 5.4 5.4 5.8 5.8

Net profits 2.6 3.5 3.5 3.5 3.5 3.5 3.9 3.9 3.4

Effective tax rate (%) 35.0 32.6 30.0 30.0 30.0 30.0 30.0 30.0

YoY(%)

Sales 1.9 6.7 4.9 4.9 7.5 7.5 6.6 5.7 4.9

COGS 13.7 11.8 1.0 7.3 7.8 7.8 7.6 6.8

SG&A 7.8 10.3 -2.9 4.9 7.5 7.5 6.6 5.7

Total OP 50.7 18.7 17.0 17.0 8.7 8.7 11.0 11.0 14.5

RP 42.8 17.4 9.0 9.0 8.5 8.5 10.8 10.8 4.3

Pre tax income 103.0 35.5 -1.6 -1.6 8.9 8.9 15.3 15.3

Net profits -25.7 42.9 6.2 6.2 8.1 8.1 17.0 17.0 3.7

Source: Company data, J.P. Morgan estimates


14 August 2015


Hisashi Moriyama

(81-3) 6736-8601

[email protected]

Investment Thesis, Valuation and Risks

Fuji Electric (6504) (Neutral; Price Target: 570)

Investment Thesis

Our focus is on how the company can cultivate unique growth areas in the

geothermal and thermal power fields and whether it can further develop and cultivate

business in unique product areas as it has done in the food & beverage distribution

segment.

Valuation

Maintain price target of 570. Our price target equates to an FY2015 EV/EBITDA of

7.2x based on our forecasts (P/E of 13.7x). It derives from a sum-of-the-parts

methodology that discounts the average FY2015 EV/EBITDA of 7.4x (previously

8.1x) by 0.2pt (0.9pt) to allow for the risks of slowdowns in orders and the macro-

economy. We also extend the period for our achievement of our price target from

December 2015 through December 2016.

Risks to Rating and Price Target

Upside Scenario to Target Price/Rating

Earnings from inverters and power semiconductors could overshoot thanks to

accelerated capex in Asia and China

Downside Scenario to Target Price/Rating

Earnings from power semiconductors could undershoot owing to increased

competition and inventory adjustments


14 August 2015


Hisashi Moriyama

(81-3) 6736-8601

[email protected]

Fuji Electric (6504): Summary of Financials

Income statement in millions 2015/3 2016/3E 2017/3E 2018/3E Cash Flow statement in millions 2015/3 2016/3E 2017/3E 2018/3E

Revenues 810,678 850,000 914,000 966,000 Operating CF 51,459 17,503 190,395 -17,762

Cost of revenue -579,076 -605,000 -651,200 -687,300 D&A 33,615 29,000 30,000 30,000

Operating expenses -771,361 -804,000 -864,000 -910,500 Net change in working capital -17,808 -56,497 111,395 -104,262

EBITDA 69,616 75,000 80,000 85,500 Investment CF -22,750 -22,400 -20,000 -20,000

Depreciation -30,300 -29,000 -30,000 -30,000 Capex -29,000 -36,900 -30,000 -30,000

Operating profit (EBIT) 39,316 46,000 50,000 55,500 Net change in investments -4,020 0 0 0

Other income 5,796 3,300 3,300 3,300 Free cash flow 22,476 -18,328 161,463 -46,712

Other expenses -1,947 -800 -800 1,200 Financing CF -33,828 2,000 2,000 2,000

Pretax income 45,719 45,000 49,000 56,500 Net debt (cash) 125,271 130,225 -40,171 -2,410

Abnormal items (net) 2,580 -2,000 -2,000 -2,000 Change in Net debt (cash) -40,208 4,954 -170,396 37,761

Income taxes -14,918 -13,500 -14,700 -16,950

Minorities -2,822 -1,800 -2,200 -2,000

Net income - GAAP 27,978 29,700 32,100 37,550

Diluted shares outstanding (mn) 715 715 715 715

Balance Sheet in millions 2015/3 2016/3E 2017/3E 2018/3E Ratio Analysis 2015/3 2016/3E 2017/3E 2018/3E

Total assets 904,522 896,059 1,123,380 1,077,554 Gross Margin 24.8% 25.4% 25.5% 25.7%

Cash and cash equivalents 31,953 28,999 201,395 165,634 EBITDA margin 8.6% 8.8% 8.8% 8.9%

Trade receivable 237,631 244,799 273,955 274,312 ROCE 5.7% 6.7% 6.8% 7.0%

Other current assets 55,773 50,000 50,000 50,000 Return on equity (ROE) 10.2% 8.9% 8.9% 9.6%

Net Tangible fixed assets 174,953 182,853 182,853 182,853 D/E ratio 45.1% 42.4% 39.8% 37.2%

Net intangible fixed assets 15,295 7,500 7,500 7,500 Div payout ratio 23.0% 24.1% 26.7% 26.6%

Investments/other assets 251,201 250,000 250,000 250,000

Total liabilities 555,590 520,427 718,648 638,272

Short term debt 68,095 70,095 72,095 74,095

Other short term liabilities 186,005 188,916 277,129 309,794

Long term debt 89,129 89,129 89,129 89,129

Other long term liabilities 61,713 91,008 91,008 91,008

Minority interests 29,296 29,296 29,296 29,296

Total Equity 348,932 375,632 404,732 439,282

Source: Company data and J.P. Morgan estimates

Note: in millions (except per-share data).Fiscal year ends Mar


14 August 2015


Hisashi Moriyama

(81-3) 6736-8601

[email protected]

JPM Q-Profile

Fuji Electric Co., Ltd. (JAPAN / Industrials)As Of: 07-Aug-2015 [email protected]

Local Share Price Current: 545.00 12 Mth Forward EPS Current: 43.57

PE (1Yr Forward) Current: 12.5x P/E Relative to Japan Index Current: 0.82

Earnings Yield (& Local Bond Yield) Current: 8% Dividend Yield (Trailing) Current: 1.75

ROE (Trailing) Current: 11.91 Price/Book (Value) Current: 1.4x

Summary

Fuji Electric Co., Ltd. 3074.97 As Of:

JAPAN 13.57261 TICKER 6504 JP Local Price: 545.00

Industrials Electrical Equipment EPS: 43.57

Latest Min Max Median Average 2 S.D.+ 2 S.D. - % to Min % to Max % to Med % to Avg

12mth Forward PE 12.51x 0.00 50.00 15.90 17.56 36.62 -1.51 -100% 300% 27% 40%

P/BV (Trailing) 1.38 0.28 2.09 1.15 1.21 1.91 0.51 -79% 52% -17% -12%

Dividend Yield (Trailing) 1.75x 0.00 7.43 1.60 1.71 3.88 -0.47 -100% 323% -9% -3%

ROE (Trailing) 11.91 -22.48 20.37 5.00 4.08 21.34 -13.17 -289% 71% -58% -66%

Source: Bloomberg, Reuters Global Fundamentals, IBES CONSENSUS, JPMorgan Quantitative & Derivative Strategy

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Jan

/11

Oct/1

1

Ju

l/1

2

Ap

r/1

3

Jan

/14

Oct/1

4

Ju

l/1

5

-10.0x

0.0x

10.0x

20.0x

30.0x

40.0x

50.0x

60.0x

Ju

l/0

0

Ma

r/0

1

Nov/0

1

Ju

l/0

2

Ma

r/0

3

Nov/0

3

Ju

l/0

4

Ma

r/0

5

Nov/0

5

Ju

l/0

6

Ma

r/0

7

Nov/0

7

Ju

l/0

8

Ma

r/0

9

Nov/0

9

Ju

l/1

0

Ma

r/1

1

Nov/1

1

Ju

l/1

2

Ma

r/1

3

Nov/1

3

Ju

l/1

4

Ma

r/1

5

0.0x

0.5x

1.0x

1.5x

2.0x

2.5x

Jul/00

Mar/

01

No

v/0

1

Jul/02

Mar/

03

No

v/0

3

Jul/04

Mar/

05

No

v/0

5

Jul/06

Mar/

07

No

v/0

7

Jul/08

Mar/

09

No

v/0

9

Jul/10

Mar/

11

No

v/1

1

Jul/12

Mar/

13

No

v/1

3

Jul/14

Mar/

15

P/B Trailing P/B Forward

-25.00

-20.00

-15.00

-10.00

-5.00

0.00

5.00

10.00

15.00

20.00

25.00

Jul/00

Mar/

01

Nov/0

1

Jul/02

Mar/

03

Nov/0

3

Jul/04

Mar/

05

Nov/0

5

Jul/06

Mar/

07

Nov/0

7

Jul/08

Mar/

09

Nov/0

9

Jul/10

Mar/

11

Nov/1

1

Jul/12

Mar/

13

Nov/1

3

Jul/14

Mar/

15

0.0

1.0

2.0

3.0

4.0

5.0

6.0

7.0

8.0

Jul/00

Mar/

01

No

v/0

1

Jul/02

Mar/

03

No

v/0

3

Jul/04

Mar/

05

No

v/0

5

Jul/06

Mar/

07

No

v/0

7

Jul/08

Mar/

09

No

v/0

9

Jul/10

Mar/

11

No

v/1

1

Jul/12

Mar/

13

No

v/1

3

Jul/14

Mar/

15

0.00

0.50

1.00

1.50

2.00

2.50

3.00

Jul/00

Mar/

01

No

v/0

1

Jul/02

Mar/

03

No

v/0

3

Jul/04

Mar/

05

No

v/0

5

Jul/06

Mar/

07

No

v/0

7

Jul/08

Mar/

09

No

v/0

9

Jul/10

Mar/

11

No

v/1

1

Jul/12

Mar/

13

No

v/1

3

Jul/14

Mar/

15


14 August 2015


Hisashi Moriyama

(81-3) 6736-8601

[email protected]

Analyst Certification: The research analyst(s) denoted by an AC on the cover of this report certifies (or, where multiple research

analysts are primarily responsible for this report, the research analyst denoted by an AC on the cover or within the document

individually certifies, with respect to each security or issuer that the research analyst covers in this research) that: (1) all of the views

expressed in this report accurately reflect his or her personal views about any and all of the subject securities or issuers; and (2) no part of

any of the research analyst's compensation was, is, or will be directly or indirectly related to the specific recommendations or views

expressed by the research analyst(s) in this report. For all Korea-based research analysts listed on the front cover, they also certify, as per

KOFIA requirements, that their analysis was made in good faith and that the views reflect their own opinion, without undue influence or

intervention.

Important Disclosures

Company-Specific Disclosures: Important disclosures, including price charts and credit opinion history tables, are available for

compendium reports and all J.P. Morgancovered companies by visiting https://jpmm.com/research/disclosures, calling 1-800-477-0406,

or e-mailing [email protected] with your request. J.P. Morgans Strategy, Technical, and Quantitative

Research teams may screen companies not covered by J.P. Morgan. For important disclosures for these companies, please call 1-800-477-

0406 or e-mail [email protected].

Date Rating Share Price

(Y)

Price Target

(Y)

15-May-07 OW 532 700

08-Jun-07 OW 573 770

03-Aug-07 OW 496 720

07-Feb-08 OW 363 580

03-Apr-08 N 424 460

12-May-08 N 399 430

31-Jul-08 N 301 350

30-Sep-08 N 241 280

04-Nov-08 N 142 230

25-Dec-08 N 128 190

14-Feb-09 N 115 155

02-Nov-09 N 166 180

09-Jan-10 N 167 210

29-Jan-10 OW 180 300

10-May-10 N 267 300

23-Jun-10 N 276 320

08-Oct-10 N 210 210

02-Dec-10 OW 226 290

28-Jan-11 OW 251 300

07-Oct-11 OW 200 245

28-Oct-11 OW 237 275

17-Jan-12 N 206 190

10-Jul-12 N 179 179

01-Feb-13 N 214 200

26-Mar-13 N 286 270

26-Apr-13 N 332 280

28-Jun-13 N 329 330

26-Jul-13 N 372 410

25-Oct-13 N 412 435

26-Oct-13 N 420 450

09-Jun-14 OW 472 570

The chart(s) show J.P. Morgan's continuing coverage of the stocks; the current analysts may or may not have covered it over the entire

period.

J.P. Morgan ratings or designations: OW = Overweight, N= Neutral, UW = Underweight, NR = Not Rated

0

187

374

561

748

935

1,122

Price(Y)

Sep

06

Mar

08

Sep

09

Mar

11

Sep

12

Mar

14

Sep

15

Fuji Electric (6504) (6504.T, 6504 JT) Price Chart

OW Y720 N Y430N Y230 OW Y300 OW Y300 N Y190 N Y280N Y435

OW Y770 N Y460N Y280N Y155 N Y210N Y320OW Y290 OW Y275 N Y270N Y410

OW Y700OW Y580N Y350N Y190 N Y180N Y300N Y210 OW Y245N Y179N Y200N Y330N Y450OW Y570

Source: Bloomberg and J.P. Morgan; price data adjusted for stock splits and dividends.

Initiated coverage May 15, 2007.

10


14 August 2015


Hisashi Moriyama

(81-3) 6736-8601

[email protected]

Explanation of Equity Research Ratings, Designations and Analyst(s) Coverage Universe:

J.P. Morgan uses the following rating system: Overweight [Over the next six to twelve months, we expect this stock will outperform the

average total return of the stocks in the analysts (or the analysts teams) coverage universe.] Neutral [Over the next six to twelve

months, we expect this stock will perform in line with the average total return of the stocks in the analysts (or the analysts teams)

coverage universe.] Underweight [Over the next six to twelve months, we expect this stock will underperform the average total return of

the stocks in the analysts (or the analysts teams) coverage universe.] Not Rated (NR): J.P. Morgan has removed the rating and, if

applicable, the price target, for this stock because of either a lack of a sufficient fundamental basis or for legal, regulatory or policy

reasons. The previous rating and, if applicable, the price target, no longer should be relied upon. An NR designation is not a

recommendation or a rating. In our Asia (ex-Australia) and U.K. small- and mid-cap equity research, each stocks expected total return is

compared to the expected total return of a benchmark country market index, not to those analysts coverage universe. If it does not appear

in the Important Disclosures section of this report, the certifying analysts coverage universe can be found on J.P. Morgans research

website, www.jpmorganmarkets.com.

Coverage Universe: Moriyama, Hisashi: Canon (7751) (7751.T), Disco (6146) (6146.T), FUJIFILM Holdings (4901) (4901.T), Fuji

Electric (6504) (6504.T), HOYA (7741) (7741.T), Hitachi (6501) (6501.T), Hitachi High-Technologies (8036) (8036.T), Konica Minolta

(4902) (4902.T), Mitsubishi Electric (6503) (6503.T), Nikon (7731) (7731.T), Ricoh (7752) (7752.T), Seiko Epson (6724) (6724.T),

Tamron (7740) (7740.T), Tokyo Electron (8035) (8035.T), Toshiba (6502) (6502.T)

J.P. Morgan Equity Research Ratings Distribution, as of June 30, 2015

Overweight

(buy)

Neutral

(hold)

Underweight

(sell)

J.P. Morgan Global Equity Research Coverage 44% 43% 13%

IB clients* 51% 48% 38%

JPMS Equity Research Coverage 45% 47% 9%

IB clients* 71% 66% 57%

*Percentage of investment banking clients in each rating category.

For purposes only of FINRA/NYSE ratings distribution rules, our Overweight rating falls into a buy rating category; our Neutral rating falls into a hold

rating category; and our Underweight rating falls into a sell rating category. Please note that stocks with an NR designation are not included in the table

above.

Equity Valuation and Risks: For valuation methodology and risks associated with covered companies or price targets for covered

companies, please see the most recent company-specific research report at http://www.jpmorganmarkets.com, contact the primary analyst

or your J.P. Morgan representative, or email [email protected].

Equity Analysts' Compensation: The equity research analysts responsible for the preparation of this report receive compensation based

upon various factors, including the quality and accuracy of research, client feedback, competitive factors, and overall firm revenues.

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and may not be subject to FINRA Rule 2711 and NYSE Rule 472 restrictions on communications with covered companies, public

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11


14 August 2015


Hisashi Moriyama

(81-3) 6736-8601

[email protected]

by the Hong Kong Monetary Authority and the Securities and Futures Commission in Hong Kong and/or J.P. Morgan Broking (Hong Kong) Limited (CE

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12


14 August 2015


Hisashi Moriyama

(81-3) 6736-8601

[email protected]

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Copyright 2015 JPMorgan Chase & Co. All rights reserved. This report or any portion hereof may not be reprinted, sold or

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Fuji Electric (6504)Company ProfileValuation

Investment Thesis, Valuation and Risks

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