The company has completed a share repurchase program on May 16, 2025. Under the program, the company completed the repurchase of 1,565,300 shares, representing 5.43% for JPY9,736.2m at a price of JPY6,220 per share. This initiative aimed to enhance shareholder returns, improve capital efficiency, and maintain a flexible capital policy that adapts to changes in the business environment. Following the buyback announcement on May 15, 2025, Fukuda Denshi’s stock reacted positively, surging by 12.4% till date.
The Fukuda Denshi group produced Japan’s first automatic ECG analysis system in 1969. Starting with electrocardiographs, Fukuda Denshi has evolved into a manufacturer specialized in medical devices which covers prevention/testing, treatment, follow-up observation, home medical care, and rehabilitation in the cardiac and respiratory fields. The group provides services in more than 60 countries globally. It has 4 reportable segments, with Physiological diagnostic equipment contributing 20% of revenue, Patient monitoring equipment at 7%, Medical treatment equipment at 45%, and Consumables and other products at 28%.
Looking ahead, Fukuda Denshi plans to explore M&A to bolster its R&D capabilities. It aims to integrate cutting-edge AI and robotics to drive technological innovation.
On May 30, 2025, it has agreed to acquire a 51% stake in M.Heart Co. Ltd. from CAC Corporation through a share transfer agreement. The transaction is anticipated to be finalized by June 30, 2025.
Healthy cash flows
Fukuda Denshi Co. achieved a CAGR in revenue of 1.7% from FY 22 to FY 25, reaching JPY139.0bn in FY 25. Operating income increased by 4.4% over the same period, reaching JPY25.9bn in FY 25. Net income also grew at an CAGR of 4.7%, reaching JPY18.6bn in FY 25. Additionally, operating margins expanded from 17.2% in FY 22 to 18.6% in FY 25, while net margins increased from 12.3% in FY 22 to 13.4% in FY 25.
Cash flow from operations has been positive for the past three years and grew at a CAGR of 12.6%, rising from JPY23.1bn in FY 22 to JPY33.0 bn in FY 2025. Additionally, free cash flows have been positive for the past three years, reaching JPY18.5bn in FY 2025, indicating solid cash generation and financial stability.
The analysts project a revenue CAGR of 2.5% over FY 25-27, reaching JPY146.0bn. However, analysts estimate a slight decline in operating income, with a CAGR of 0.4% CAGR, resulting in JPY25.7bn and operating margins of 17.6% in FY 27. Net profit is also expected to decrease by 1.9% CAGR, reaching JPY17.9bn with net profit margins of 12.3% in FY 27, reverting to margin levels similar to FY 22.
The company’s local peer, Olympus Corporation achieved a revenue 3-year CAGR of 4.7%, reaching JPY997.3bn in FY 25. Its operating profit CAGR was 1.8%, reaching JPY162.5bn, and its net profit CAGR was 0.6%, reaching JPY117.8bn in FY 25.
Focus on resilience and DX
The Japanese economy is on a gradual recovery track but faces uncertainty due to rising resource prices and changing monetary policies in Europe and America, and concerns over the impact of international trade tensions. In the medical industry, the company emphasizes the importance of preparing for future infectious diseases and advancing digital transformation (DX). Healthcare frameworks should align with regional plans, enhance medical institutions’ capabilities, and promote regional healthcare networks.
Positive market gains
The company’s stock showed stronger returns compared to its local peer, Olympus Corporation. Over the past year, the company’s stock rose by 15.3%, whereas Olympus Corporation’s stock fell by 25.0%.
Fukuda Denshi Co. has maintained an average dividend yield of 3.2% over the past three years. In FY 25, the company paid a dividend of JPY195 per share, resulting in a dividend yield of 3.0% and a payout of 30.2%. Analysts anticipate that the dividend will increase to JPY200 per share by FY 27.
The company is currently trading at a P/E of 11.2x, which is higher than its historical P/E of 9.5x. However, it is lower than its peer, Olympus Corporation’s P/E of 19.7x. It is generally liked by two analysts, both issuing ‘Hold’ ratings, for an average target price of JPY6,900, implying 2.5% upside potential from the current price.
Overall, Fukuda Denshi demonstrates a mix of positive developments and potential challenges. The company has strategically enhanced shareholder returns through a share repurchase program and plans to drive innovation by integrating AI and robotics and pursuing M&A. With robust cash flow growth and a strong dividend yield, the company’s stock has delivered good returns. However, analysts project slight declines in operating and net income by FY 27, indicating potential challenges ahead. Risks include healthcare policy changes, product launch delays due to stringent regulations and clinical trials, high dependence on certain suppliers, and foreign exchange fluctuations, which could adversely affect revenue and operations.
