摩根士丹利-日本精密仪器：办公设备投资策略-Precision Instruments Japan：Investment Strategy for Office Equipment-20261008

MorganstanleyMUFG

October8,202602:31PMGMT

PrecisionInstruments|Japan

lnvestmentStrategyforOfficeEquipment

Wemaintaintheemphasisinstockselectiononindividualgrowthfactors.

KeyTakeaways

Ourpreferenceorderfor5officeequipmentstocksisFUJIFILM(OW)>Canon(OW)>Ricoh(EW)>KonicaMinolta(EW)>SeikoEpson(UW).

Wefavornameswithhighprobabilityofprofitgrowthintothenextbusinessyearbasedonengagementwithgrowthbusinessesandeffortstoimproveearnings.

FUJIFILM>Canon>Ricoh>KonicaMinolta>SeikoEpson:Whileanendtotheriseininterestratesandyenweakeningpresentamacrobackdroptosupportofficeequipmentstocksharepricesfromthevaluationangle,structuralshrinkageoftheprintingmarketandrisingcostsaretemperingprofitgrowth.Wethuscontinuetobelieveanemphasisonindividualgrowthfactors–eg,self-helpeffortstoimproveearnings–isimportantinstockselection.

ForFUJIFILM(OW),weawaittheendofbadnewswithCDMO-relatednegativeslikelypricedin.Webelieveprogressinrestructuringtofocusongrowthbusinessgivesmuchscopeforre-ratingonceCDMOimprovementisconfirmed.WealsolikeCanon(OW)forthehighprobabilityofprofitgrowthinF12/27thanksto

restructuringeffects,andtherelativelylowvaluation.ForSeikoEpson(UW),wethinkmarketexpectationsofgrowthbusinessesarerunningahead,andsee

relativelylowinvestmentappealasthevaluationlooksoverheated.

Earningsresultspreview:Wethinkeffectsofrisingcosts,includingoilpricegrowthtiedtotheMiddleEastsituation,andhighsemiconductormemoryprices,willstarttoshowupinearnestinresultsforJul-Sep2026.Whileseeinglimitedriskofcutsinfull-yearcompanyplansowingtoabufferfromtariffrebatesinthepreceding

quarterandyendepreciation,weseethepossibilityofupwardrevisionsaslimitedtoo.Lookingaheadtothenextbusinessyear,manymarketparticipantshavea

guardedviewamidconcernsaboutprofitfalls,duetodroppingoutoftariffrebatesamongotherfactors,andweexpectattentiontofocusonidiosyncraticgrowth

factorstodriveearningsatindividualcompanies.

IdEA

MoRGANSTANLEyMUFGSEcuRiTiEsCo.,LTd.+

MieYamazaki

EquityAnalyst

Mie.Yamazaki@

+8136836-8899

PREcisioNINsTRumENTs

Japan

IndustryViewIn-Line

WHAT’sCHANGED

Ricoh(7752.T)

From

To

PriceTarget

¥1,400

¥1,550

SeikoEpson(6724.T)

From

To

PriceTarget

¥1,800

¥2,000

MorganStanleydoesandseekstodobusinesswith

companiescoveredinMorganStanleyResearch.Asaresult,investorsshouldbeawarethatthefirmmayhaveaconflictofinterestthatcouldaffecttheobjectivityofMorganStanley

Research.InvestorsshouldconsiderMorganStanley

Researchasonlyasinglefactorinmakingtheirinvestmentdecision.

Foranalystcertificationandotherimportantdisclosures,refertotheDisclosureSection,locatedattheendofthisreport.

+=Analystsemployedbynon-U.S.affiliatesarenotregisteredwithFINRA,maynotbeassociatedpersonsofthememberandmaynotbesubjecttoFINRArestrictionson

communicationswithasubjectcompany,publicappearancesandtradingsecuritiesheldbyaresearchanalystaccount.

2

Morganstanley

RESEARCH

IDEA

AlphaSignalsEarningsPreview

FocusKPI

FocusKPISurprise

LikelyimpacttoconsensusEPS*

EarningsTrendsintheBiologicsCDMO

FUJIFILMHoldings4901.T

In-lineLargelyunchangedBusiness

•Our2Qoperatingprofitforecastis¥64.3billion(down22.7%YoY),comparedwiththeconsensusestimateof

¥82.6billion.

•Weexpectthecompanytomaintainitsfull-yearguidance.

KonicaMinolta4902.T

Whetherthecompanyannouncesadditionalrestructuringmeasures

In-lineModestrevisionlower

•Our2Qoperatingprofitforecastis¥17.3billion(+33.9%YoY),comparedwiththeconsensusestimateof

¥12.9billion.

•Weexpectthecompanytomaintainitsfull-yearguidance.

Demandtrendsfordatacentercrystal

SeikoEpson6724.T

In-lineModestrevisionlowerdevices

•Our2Qoperatingprofitforecastis¥36.5billion(+114.6%YoY),comparedwiththeconsensusestimateof

¥32.5billion.

•Weexpectthecompanytomaintainitsfull-yearguidance.

EarningstrendsinSPEandMedical

Canon7751.T

In-line▲Modestrevisionhigherbusiness

•Our3Qoperatingprofitforecastis¥84.8billion(-3.7%YoY),comparedwiththeconsensusestimateof¥92.0billion.

•Weexpectthecompanytomaintainitsfull-yearguidance.

PerformancetrendsinRecurringrevenue

Ricoh7752.T

In-lineModestrevisionlowerandOfficeprinting

•Our2Qoperatingprofitforecastis¥18.7billion(-18.0%YoY),comparedwiththeconsensusestimateof¥19.5billion.

•Weexpectthecompanytomaintainitsfull-yearguidance.

*LikelyimpacttoconsensusEPSisforthenext12monthsSource:Companydata,MorganStanleyResearch

MorganstanleyMUFGIDEA

CoverageforPrinters

Exhibit1:CoverageforPrinters

Ticker

Company

SharePrice

2026/10/08

StockRating

PriceTarget

(JPY)

Potential

Return(%)

Old

→

New

4901.T

FujifilmHoldings

3,416

Overweight

→

Overweight

4,700

38%

4902.T

KonicaMinolta

643

Equal-Weight

→

Equal-Weight

550

-14%

6724.T

SeikoEpson

3,387

Underweight

→

Underweight

2,000

-41%

7751.T

Canon

4,635

Overweight

→

Overweight

5,700

23%

7752.T

Ricoh

1,710

Equal-Weight

→

Equal-Weight

1,550

-9%

Source:MorganStanleyResearch

Exhibit2:Stockperformance

Indexedto100

FUJIFILMHoldings(4901.T)KonicaMinolta(4902.T)SeikoEpson(6724.T)

Canon(7751.T)Ricoh(7752.T)

200.0

180.0

160.0

140.0

120.0

100.0

80.0

60.0

40.0

6-Oct-216-Apr-226-Oct-226-Apr-236-Oct-236-Apr-246-Oct-246-Apr-256-Oct-256-Apr-266-Oct-26

Source:ContextAnalyzer丿MorganStanleyResearch

Exhibit3:P/Etrends

30.0

25.0

20.0

15.0

10.0

5.0

8-Oct-218-Oct-228-Oct-238-Oct-248-Oct-25

FUJIFILM

Holdings

(4901.T)

Konica

Minolta

(4902.T)

SeikoEpson(6724.T)

Canon(7751.T)

Ricoh

(7752.T)

Source:ContextAnalyzer丿MorganStanleyResearch

Exhibit4:P/Btrends

1.8

1.6

1.4

1.2

1.0

0.8

0.6

0.4

0.2

0.0

8-Oct-218-Oct-228-Oct-238-Oct-248-Oct-25

FUJIFILM

Holdings

(4901.T)

Konica

Minolta

(4902.T)

SeikoEpson(6724.T)

Chart!$O$35Canon

(7751.T)

Ricoh

(7752.T)

Source:ContextAnalyzer丿MorganStanleyResearch

MoRGANSTANLEyMUFG3

4

MorganstanleyMUFGIDEA

Exhibit5:Orderofpreference

Fujifilm

Canon

RicohKonicaMinoltaSeikoEpson

4901.T

7751.T

7752.T4902.T6724.T

Rating

Overweight

Overweight

Equal-Weight

Equal-weight

Underweight

TradingCurrency

JPY

JPY

JPY

JPY

JPY

PriceTarget

4,700.0

5,700.0

1,550.0

550.0

2,000.0

CurrentPrice

3,416.0

4,635.0

1,709.5

643.2

3,387.0

Upside/(Downside)(%)

38%

23%

-9%

-14%

-41%

MarketCap(inUSDmm)

25,893.8

24,906.3

6,118.4

2,020.9

6,866.3

AvgDailyTradedVol(inUSDmm)

102.4

106.7

21.2

14.2

25.7

StreetView:Ratings

Buy/Overweight

||||||||||||||||||||||88%

||||||||33%

||||||||33%

0%

||||||||33%

Hold/Equal-weight

|||13%

|||||||||||||||58%

|||||||||||||||||67%

|||||||||||||||||||||86%

||||||||33%

Sell/Underweight

0%

||8%

0%

||||14%

||||||||33%

BullCaseValue

6,000.0

7,500.0

2,000.0

800.0

3,900.0

Upside(%)

76%

62%

17%

24%

15%

BearCaseValue

2,800.0

3,500.0

1,100.0

400.0

1,200.0

Downside(%)

-18%

-24%

-36%

-38%

-65%

Risk/RewardSkew

4.2

2.5

0.5

0.6

0.2

MorganStanleyEstimates

FY26e

JPY

JPY

JPY

JPY

JPY

Sales

3,623,700

4,845,900

2,628,700

1,084,000

1,477,600

EBITDA

580,000

707,100

218,500

113,666

178,400

EBIT

367,600

465,400

107,700

50,600

98,400

EPS

225.83

343.38

119.69

53.79

195.29

FY27e

Sales

3,826,000

4,965,300

2,624,400

1,070,200

1,457,000

EBITDA

658,300

737,700

206,500

115,866

165,100

EBIT

428,000

491,200

92,300

48,500

85,100

EPS

263.72

355.51

106.89

48.10

171.38

ValuationMultiplesatLastClose

FY26e

P/E

15.1x

13.5x

14.3x

12.0x

17.3x

EV/EBIT

13.4x

9.6x

11.6x

11.2x

10.5x

EV/EBITDA

8.5x

6.3x

5.7x

5.0x

5.8x

EV/Sales

1.4x

0.9x

0.5x

0.5x

0.7x

FCFYield

2.7%

5.1%

8.8%

13.1%

4.3%

FY27e

P/E

13.0x

13.0x

16.0x

13.4x

19.8x

EV/EBIT

11.2x

8.9x

12.9x

10.5x

11.8x

EV/EBITDA

7.3x

5.9x

5.8x

4.4x

6.1x

EV/Sales

1.3x

0.9x

0.5x

0.5x

0.7x

FCFYield

5.5%

6.4%

9.0%

15.5%

5.3%

StockPricePerformance

1Month

5.5%

3.0%

3.4%

3.5%

7.5%

3Month

(6.3%)

7.4%

15.7%

9.1%

18.3%

1Year

(9.4%)

1.5%

24.6%

17.0%

70.1%

YTD

2.2%

0.0%

24.4%

(5.4%)

70.8%

Source:MorganStanleyResearch,FactSet(consensusmean).e=MorganStanleyResearchestimates.AsofOct8.

MoRGANSTANLEyMUFG5

MorganstanleyMUFGIDEA

Stockselectionapproach

Wemaintainourviewthatindividualstockselectioniskey

Whilethemacroeconomicenvironment,shapedbyprolongedhighinterestratesandaweakyen,providessupportforofficeequipmentsharepricevaluations,structural

shrinkageintheprintingmarketandrisingcostsarehamperingearningsgrowth.

Consequently,wecontinuetorecommendcarefulstockselectionbasedonindividualcompanies’earningsgrowthprospects,drivenmainlybymanagementinitiativesto

improveearnings.

Inthis,wecontinuetofocusontheexistenceofnon-printinggrowthbusinessesand

progressonstructuralreformstoimproveearnings.StockmarketattentionisbeginningtoshifttoF27earnings;weseethebarriertoF27YoYprofitgrowthrisinggivendrags

fromthedropoutofone-timegainsfromtariffrefundsbookedinF26andcostsincreases.Wethinkthemarketwillprefercompaniesthatcanabsorbtheseheadwindsthrough

growthbusinessexpansionandrestructuring,therebyachievingfurtherprofitgrowthinF27.

Exhibit6:ROE-P/Bcorrelation

PBR

1.40y=0.0907x+0.3165

R²=0.433Epson

1.20

Canon

1.00

Fujifilm

0.80

0.60

0.40KonicaMinolta

0.20

0.00

0.01.02.03.04.05.06.07.08.09.0ROE

Ricoh

Source:MorganStanleyResearch,basedonFY+2estimates.

Ourdescendingorderofpreference:(1)Fujifilm,(2)Canon,

(3)Ricoh,(4)KonicaMinolta,(5)SeikoEpson

Fujifilm(OW):WithCDMObusinessbadnewsbeingpricedin,wearelookingaheadtothisdroppingoutasafactor.Theshareshavecorrectedsharplysincethecuttobio

CDMOearningsguidancebutearningsinotherbusinessesaresolidandthelonger-termgrowthoutlookremainsintact.WebelievethatCDMOearningswillbottomthisyear,

withthelossshrinkingfromnextfiscalyearon.WethinkthatimprovementinROIC

drivenbythepeakingoutoflarge-scalecapitalinvestmentandareductioninthecostof

6

MorganstanleyMUFGIDEA

capitalasbusinessuncertaintyebbswilltriggerrevaluationoftheshares.Withpartialspin-offofthebusinessinnovationbusinessafurtherpotentialcatalyst,wethinkthe

marketwillbefocusingonascertainingtheCDMOearningsbottom.Fujifilmisourmostpreferredstockgivenearningsrecoveryandpotentialforre-ratingofcorporatevalue.

Canon(OW):WelikeCanonforthelikelihoodofprofitgrowthinF12/27andcurrentundervaluationoftheshares.Despiteheadwindsfromtheslumpintheprintingmarketandincreasesinsemiconductormemory,crudeoilandothercosts,weexpectthe

companytostarttoenjoyapay-offfromreductioninrestructuringcostsandcutstofixedcostsinF12/27.Welookforadditionalprofitgrowthcontributionsfromanincreasein

semiconductorlithographysystemsalesvolume,networkcamerabusinessgrowthanddigitalcamerabusinessnormalization.Whileweseearelativelystronglikelihoodofrealprofitgrowth,wethinkthisisnotyetfullypricedin,leavingthesharesundervalued.

Ricoh(EW):Corebusinessearningsimprovementvisibilityisstillbelowthehorizon.Althoughthevaluationlooksundemanding,weremaincautiousabouttheprospectof

sustainedcorebusinessprofitgrowth.Recentstrongearningshaveowedmuchtoone-offfactors,suchastariffrefundsandsubsidiarydisposalgains,andweforecastYoYprofit

declineinF3/28,whenthesefactorsdropout.Ahigherprofitcontributionfromthe

workplaceservicesbusiness,positionedasagrowthdriver,andearningsstabilizationinthedigitalproductsbusiness,currentlyundergoingrestructuring,remainuncertain.Whilemanagementisimplementinginitiativestostrengthenearnings,wethinkcatalystsfortheshareswillremainthinonthegrounduntiltheeffectsoftheseinitiativesstarttosurfaceinearnings

KonicaMinolta(EW):Thesharesarebeingweigheddownbyearningsimprovement

uncertaintyandfinancialconcerns.Althoughthecompanyisbeginningtoenjoythe

fruitsofgrowthintheindustrysegment,earningscapabilityimprovementinthecore

digitalworkplaceandprofessionalprintingsegmentsremainsuncertain.Wethinkthe

companywillfaceatougherearningsclimatethanpeersinF3/28asitseesafull-scale

increaseincostsduetorisingsemiconductormemoryprices.Thatsaid,furtherconcreterestructuringmeasurescouldraiseexpectationforearningsimprovement.Althoughsharepricevaluationsarelow,wethinktheshareswillremainbecalmeduntiltheeffectivenessofstructuralreformsandthepolicyonhybridloanrefinancingbecomeclear.

SeikoEpson(UW):Stockvaluationsappearstretchedfollowingthepricinginoffuturegrowthaheadoftime.Whileweseeliquidcrystaldevicesfordatacenterapplicationsasanewgrowthdriver,thecompetitivelandscaperemainsuncertainamidthetransitiontonext-generation1.6Tarchitecture.AlthoughweexpectrecoveryinChinesedemandfor

inkjetheads,largecapacityinkjetprintersalesmomentumhasflagged,leavinguscautiousaboutprospectsforprinterbusinessgrowthacceleration.Wearenotsurethatthe

companycanoffsetdragsonearningsfromthedropoutoftariffrefundsandcost

increaseswithearningsfromexistingandgrowthbusinessesinF3/28.Withthemarketpricinginhighgrowthexpectationsfortheliquidcrystaldevicesbusinessaheadoftime,weseesharepricevaluationsasunattractiveandadeteriorationinrisk-reward.

MoRGANSTANLEyMUFG7

MorganstanleyMUFGIDEA

FocuspointsforJul-Sepresults

Officeequipment:Jul–Sepearningspreview

Expectlimitedearningssurprises:Jul–Sep2026resultswillbegininlateOct.Yen

weaknesslikelyremainedatailwind,buthighercosts(includingoilpricesamidworseningMiddleEasttensionsandsemiconductormemory)shouldbegintoweighmore

meaningfully.Ofthefiveofficeequipmentcompanies,weexpecttwotoreportYoYprofitgrowthandthreetoreportdeclines.TariffrefundsbookedlastquarterandFXtailwindsshouldlimitdownsiderisktofull-yearguidance,butupsiderevisionsalsoappearunlikely.

Focusoncompany-specificdriversthatcanoffsettheconsensusearningsdeclinenextyear:Withcostinflationlargelypricedin,weexpectfewearningssurprises.However,themarketremainscautiousonnextyearduetoriskssuchastheexpiryoftariffrefunds.

Attentionshouldthereforefocusoncompany-specificgrowthdriversthatcouldsupportearnings.

FUJIFILMHoldings:Weforecast2QOPof¥64.3bn,down22.7%YoYandbelow

consensusof¥82.6bn,reflectinghigherrawmaterialcosts(includingsilverand

semiconductormemory)andstart-uplossesinbioCDMO.WeexpectHealthcareto

remainintheredwitha¥7.4bnoperatingloss.BioCDMOlossesshouldwidenQoQ,but2Qlikelymarksthenear-termtroughfollowingresolutionoftheFDAissueatend-Sep.Weexpectfull-yearguidancetobemaintained.Keyareastowatcharetheramp-upoflarge-scalebioreactors,neworders,andthebioCDMOearningsoutlook.

KonicaMinolta:Weforecast2QOPof¥17.3bn(+33.9%YoY;consensus:¥12.9bn).We

envisagesomefurtherbookingoftariffrefundsin2Q,andwithoutthisexpectalevel

moreorlessonparwithlastyearashighervolumesandhighercostscanceleachother

out.WebelievethattheIndustrysegmenthasbeenhealthy,centeredonsensingand

opticalcomponents,butthatthisisunlikelytohavefullymadeupforweaknessinoffice-relatedproductsandtheProductionPrintsegment.Weexpectthefirmtomaintain

existingfull-yearguidance.KonicaMinoltahasindicateditwillundertakeadditional

restructuringinprintingbusiness,andwewillbewatchingforanyadditionalinformationitmayprovide.

SeikoEpson:Weforecast2QOPof¥36.5bn(+114.%YoY;consensus:¥32.5bn),up

stronglywithhelpfromtariffrebates(about¥17bn),theendofinventoryeffectsseenin1Q,andeffectsofhigherIJheadsales.Excludingspecialfactorssuchastariffeffects,we

expectPrecisionInnovationtohaveperformedsteadily.Atthesametime,weexpectotheroperatingcoststoincludeFXconversionlossesastheyenstrengthened/dollarweakenedQoQ.Wethinkthefirmislikelytostandbyexistingfull-yearguidance.Wetoowillbe

watchingfordisclosureonearningsfromLCdevicesforopticaltransceiversandany

informationpertainingtotheshiftto1.6T–topicswhicharehighonthemarket’sradaraswell.

Canon:Weexpect3QOPtocomeinat¥84.8bn(-3.7%YoY;consensus:¥92.0bn),downoverallaseffectsofhighoilandsemiconductormemorypricescanceloutboostsfromaweakeryenandincreasedsalesrevenue.Bysegment,weforeseeprofitfallsforPrinting(heavilyimpactedbyhighercosts)andMedical(residualeffectsofsupplyissuesthat

8

MorganstanleyMUFGIdea

arosein2Q).WethinkCanontooislikelytomaintainitsexistingtargetsforthefullyear.AsmarketattentionturnstotheearningsoutlookforF12/27,wethinkthesearchwillbeonfornextyear’searningsdrivers,andwillbewatchingforsignsofrisingmarket

expectationsforfactorsincludingeffectsofrestructuringandcontributionsfromgrowthbusinesses(SPE,Medical).

Ricoh:Weforecast2QOPat¥18.7bn(-18.0%YoY;consensus:¥19.5bn),withhighercosts(includingthosetiedtoahigheroilpriceandhighersemiconductormemoryprices)

dampeningprofitYoY.Heretooweanticipatenochangeinfull-yearguidance.Worth

notingisthatRicoh’sbusinesssegmentchangeswitheffectfromF3/27lowervisibilityonnear-termearnings,andcouldamplifyquarterlyresultsvariancevs.consensus.Afocuspointattheresultsreleasewillbewhetheritispossibletoconfirmabuildupinstock-

derivedearningsinWorkplaceServices,andearningsstabilityinofficeprintingbusiness.

Exhibit7:OP:JPYmn

Period

Code

Company

Jul-Sep(JPYmn)

FYF1(JPYmn)

FYF2(JPYmn)

MSe

YoY

Consensus

MSe

Consensus

Ce:before

results

MSe

Consensus

Q2

4901

FujifilmHD

64,300

-22.7%

82,559

367,600

368,550

365,000

428,000

415,815

Q2

4902

KonicaMinolta

17,300

33.9%

12,900

50,600

50,925

50,000

48,500

51,550

Q2

6724

SeikoEpson

36,500

114.6%

32,500

98,400

97,563

101,000

85,100

95,588

Q3

7751

Canon

84,800

-3.7%

91,978

465,400

459,375

465,000

491,200

476,508

Q2

7752

Ricoh

18,700

-18.0%

19,460

107,700

101,325

95,000

92,300

98,338

Source:MorganStanleyResearch,basedoncompanydataandBloombergdata.e=MorganStanleyResearchestimates,Ce=companyestimatesasofSep16.Notes:FYF1=F3/27,F12/26.FYF2=F3/28,F12/27.

MoRGANSTANLEyMUFG9

MorganstanleyMUFGIDEA

FUJIFILMHD(4901):ReiterateOWrating

GrowthstoryintactasCDMObusinessmovestowardthefloor

ReiterateOWrating:Theequitystoryremainsoneofmultipleexpansiondrivenby

expansionofearningsingrowthdomains.Akeydomainishealthcare,wherethefirm's

downwardrevisiontotargetsforbioCDMObusinessinF3/27fueledasharpcorrectionintheshareprice.However,otherbusinessesaregenerallyhealthy,andweexpectOPtorisetonewpeaks.Otherpotentialmoves,suchasthepartialspin-offofFUJIFILMBusiness

Innovationthatthefirmisconsidering,couldalsohelptoliftstockmultiplesinthefuture.Reasonsforthesharepriceunderperformanceareclear,andwewouldexpectresolutionofissuesrelatingtoCDMObusinesstoactasacatalyst.

ExpectbioCDMOearningstomovetowardthefloor:ThesteepdownwardrevisiontoF3/27guidancewasaresponseto1)suspensionofmid/small-scaleplantintheUSto

addressFDArequirements,2)delaysinrampinguplarge-scaleequipmentintheUS,and

3)subduedordersinearly-stageprojects.Ofthese,theissuesraisedbytheFDAwere

resolvedandplantreactivatedattheendofSeptember2026.Regardinglargerfacilities,productionitselfisunderwayandthekeywillbeimprovingyields.WethereforethinkitispossiblethatF3/27willmarktheearningsbottomfornow.Inadditiontoprospectsof

improvedROICfromF3/28asCDMOlossesshrinkandinvestmentinlarge-scale

equipmentpeaksout,ifreducedbusinessuncertaintyleadstoreducedcapitalcosts,wewouldseeincreasedscopeforre-ratingbasedonimprovingspreads.

Earningsforecastupdate:WelowerourOPforecastforF3/27andmakemodest

revisionsforsubsequentyears.Atthesegmentallevel,werevisedownforHealthcarebutupforElectronicsandImaging.ForHealthcare,wehaveloweredouroutlookforbio

CDMOearnings,andnowforecastoperatinglossesof¥73bnforF3/27and¥38bninF3/28beforeamovetobreakeveninF3/29.OurupwardrevisionsforElectronicsandImaging

relatetosemiconductormaterials,digitalcamerasandtheinstaxbrand,allofwhichareseeinghealthydemand.Aligningwiththefirm'soutlook,wenowenvisagealowersumoftariffrebatesinF3/27.

PTunchangedat¥4,700:Our¥4,700PTisbasedonP/Eof18.0xappliedtoourF3/28EPSestimateof¥263.7.Ourtargetmultipleof18.0xaddsonestandarddeviationto

averageP/EsinceF3/13,withourvaluationmethodologyunchanged–uptonowwehaveappliedP/Eof18.0xtoF3/23eEPSof¥262.0.

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MorganstanleyMUFGIDEA

Exhibit8:OperatingIncomeanalysis(changeYoY)

MSE(JPYbn)FY3/27

1Q

2Q

3Q

4Q

FullyearFY3/27

FY3/28

FY3/29

CE

Fullyear

FY3/27

Healthcare

FX

1.2

2.7

-1.0

-4.0

-1.2

-4.4

0.0

4.5

Rawmaterialprice

-7.7

-6.0

-2.0

-0.3

-16.0

10.0

0.0

-23.5

One-timecost

9.2

1.5

1.0

10.3

22.0

-11.5

0.0

22.0

Operationandothers

-19.4

-25.0

5.0

17.0

-22.4

40.4

16.4

-21.6

TariffImpacts

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Subtotal

-17.0

-26.8

3.0

18.3

-22.6

32.5

16.4

-22.6

Electronics

FX

3.8

3.2

-1.2

-2.1

3.7

-5.3

0.0

5.5

Rawmaterialprice

-0.4

-0.4

-0.4

-0.8

-2.0

-0.6

0.0

-0.5

One-timecost

0.0

0.0

0.0

-2.3

-2.3

-0.5

0.0

-2.3

Operationandothers

5.2

8.3

6.9

7.1

27.6

26.8

7.9

16.4

TariffImpacts

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Subtotal

8.6

11.1

5.3

1.9

27.0

20.4

7.9

19.1

BusinessInnovation

FX

0.7

1.3

-0.5

-0.9

0.7

-2.2

0.0

3.0

Rawmaterialprice

-2.8

-2.5

-2.5

-2.2

-10.0

-3.0

0.0

-6.5

One-timecost

-3.8

-1.8

-2.3

26.0

18.1

-12.0

0.0

18.1

Operationandothers

-10.0

-1.6

11.7

1.8

1.9

25.3

3.2

3.7

TariffImpacts

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Subtotal

-17.0

-5.7

5.3

22.1

4.7

5.1

3.2

16.3

Imaging

FX

10.6

2.4

-0.9

-1.6

10.5

1.5

0.0

12.0

Rawmaterialprice

-2.6

-2.0

-2.0

-1.3

-7.8

-0.2

0.0

-10.0

One-timecost

-2.3

-0.6

0.0

1.4

-1.5

1.5

0.0

-1.5

Operationandothers

-1.7

5.3

8.0

8.9

20.5

7.4

7.5

9.5

TariffImpacts

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Subtotal

1.6

2.1

2.2

4.1

10.1

4.4

7.5

2.0

Adjustment

-

-0.4

0.3

-0.7

-1.1

-1.8

-2.0

-2.2

0.0

Total

FX

16.3

9.7

-3.6

-8.7

13.7

-10.5

0.0

25.0

Rawmaterialprice

-13.5

-9.0

-7.0

-6.3

-35.8

6.2

0.0

-29.5

One-timecost

3.1

-0.9

-1.3

35.4

36.3

-22.5

0.0

36.3

Operationandothers

-26.2

-13.7

33.7

9.4

3.2

87.2

32.9

8.0

TariffImpacts

0.0

0.0

0.0

0.0

0.0

0.0

0.0

0.0

Total

-24.1

-18.9

15.1

45.3

17.4

60.4

32.9

14.8

Source:MorganStanleyResearchbasedoncompanydata,E=MorganStanleyResearchestimates,CE=Companyestimates

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