Brother Industries Ltd (6448.TYO) started in 1908 with repair and manufacturing of parts for sewing machines. Today the Japanese company is a multinational manufacturer of electronics and electrical equipment. [mepr-active membership=”1734″ ifallowed=”show” unauth=”message” unauth_message=”Please login or purchase a membership to view full text.”] The company offers products and services such as communications and printing equipment, electronic stationery, home and industrial sewing machines, machine tools, industrial parts, karaoke systems, and since recently coding and marking equipment.
America and Europe are Brother Industries’ most important markets generating together 60% of the company’s revenues. Brother Industries is headquartered in Nagoya and listed on the Tokyo Stock Exchange since 1963. The shares can furthermore be traded in the US and Germany.
In 2015 Brother Industries acquired the UK based company Domino, an autonomous division now which contributes almost 10% to the group’s revenues. Domino is one of the world’s biggest manufacturers of coding and marking equipment for the food and medical industry. Brother Industries had until then only a small share in this growing digital printing market. Today still 97% of the printing is done with traditional analog techniques. But digital printing methods are growing rapidly. With an expected growth of 15% annually, the digital printing market is a significant opportunity for Brother Industries.
With a staff of around 36,000 employees, Brother Industries generated revenues of 310bn JPY (2.8bn USD) and a profit before tax of 37bn JPY (339m USD) during the first six months of this fiscal year. This is an increase of 3% and 27% respectively compared to the same period a year ago and if the negative impact of an appreciated yen is excluded. In 2015, the company increased revenues by 4% while profits fall by 25%, mostly due to the acquisition of Domino. In its mid-term business strategy, Brother Industries targets sales revenues of 750bn JPY and operating profits of 60bn JPY, which is just 10% and 2.4% away from results reported in 2016.
Brother Industries shows a robust equity ratio of 48%. The high debt levels resulting from the acquisition of Domino in 2015 are reduced progressively. The company reported a solid operating cash flow during the six months ending September. Cash and equivalents have been 78bn JPY (712m USD). Brother adopted IFRS accounting standards since this fiscal year making the company more comparable to its peers.
Brother Industries’ shares showed a clear uptrend in the past months. The price almost doubled since June this year and is only 12% away from old highs at 2,200 JPY seen in November 2014. Although the company remains cautious with its forecast for this year, we expect further profitability improvements and a positive impact from a stronger USD and a growing post-election US economy, one of Brother’s major markets.
AIS Rating: ★★★☆☆
| 2011/12 | 2012/13 | 2013/14 | 2014/15 | 2015/16 | 2016/17 H1 only |
|
|---|---|---|---|---|---|---|
| EPS (JPY) | 72.9 | 66.5 | 72.1 | 206.2 | 119.2 | 103.7 |
| Change | -26% | -9% | 8% | 186% | -42% | 28% |
| P/E | P/E SECTOR |
P/B | P/CF | Equity Ratio* |
ROE | Debt/ Equity** |
Div YLD |
|---|---|---|---|---|---|---|---|
| 12 | 19 | 1.8 | 6.6 | 48% | 14% | 108% | 1.8% |
* Equity / Total Assets, ** Total Liabilities / Equity
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