On Sunday, Jefferies initiated coverage on Fujimi Inc (5384:JP), a leader in semiconductor-related polishing, with a Hold rating and a price target of JPY3,300. The firm highlighted that Fujimi is poised for a near-term (NT) recovery in earnings due to strong demand for its chemical mechanical planarization (CMP) slurries and silicon wafer polishes, areas where the company holds a dominant market share.
The report from Jefferies acknowledges the positive outlook for demand in Fujimi's specialized products. However, it suggests that the potential for earnings growth is already reflected in the current stock price. Therefore, the analyst believes that while the company is set for a strong performance, the benefits may not translate into significant stock price appreciation in the immediate future.
Fujimi is also embarking on a significant expansion of its production capacity. Jefferies points out that the company's capital expenditures (CAPEX) are expected to increase fivefold compared to recent levels. This major investment phase is indicative of Fujimi's commitment to growth and its response to the increasing demand for its products.
Despite the planned expansion, Jefferies notes potential challenges ahead. The firm anticipates that the increased depreciation costs, which are likely to start impacting the company from 2026 onwards, could impede profit growth. This consideration is a factor in the Hold rating, as it may temper the financial benefits of the company's expansion in the longer term.
Overall, the initiation of coverage by Jefferies on Fujimi Inc reflects a balanced view of the company's prospects, recognizing the strength in demand for its core products against the backdrop of significant upcoming investments and their associated costs.
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