Investment Recommendation

Investment Recommendation

Canon Inc.

Group 3

Student Number: 00991974

Word count: 2159

Executive Summary

This report provides investors with an assessment of current and future performance of Canon Inc. and an investment recommendation of its stock. The report first focuses on presenting the company’s overview and describing its operating strategies. Then it provides Canon’s industry outlook and government regulations toward the industry. Risks to the company also discussed in the report.

• Canon’s strong research & development capabilities benefit it to develop competitive products, maintain its leading market position and form a strong intellectual property portfolio. By operating in a global scale, Canon has opportunities to lower currency exchange risks and reduce operation costs by utilizing local components. In addition, because of weak value of Japanese yen, exports in Japan will boost and Canon can improve its business operation and financial position.
• Risks to Canon include fluctuations of foreign exchange rates, uncontrollable situation in operating in emerging markets, high revenue dependence on Hewlett-Packard Company, threats from the smartphone market, intense competition and economic downturn.

• Despite these risks, Canon achieved increase on sales and revenue for the first time in the past three years. Canon is strongly recognized in the industry and has solid customer base from all over the world. Risk of dependence on Hewlett-Packard Company is controllable. In terms of the threats from smartphone, it is agreed that the high-level picture quality that cameras offer cannot be replicate by smartphones. Additionally, the current economic condition is fairly stable and Canon has the ability to avoid damage form economic downturn.
•   Investment recommendation: hold

1. Company Overview

1.1 Company Profile

Canon is one of the world’s leading manufactures of office multifunction devices (MFDs), copying machines, printers, cameras and medical equipment (Canon annual report, 2013). Canon manufactures the majority of its products in Japan, but in order to reduce production costs and increase productivity it also builds manufacturing subsidiaries in the Americas, Europe, and Asia and Oceania (Canon overview, 2014). For 70 years, the company has been continuously providing products that meet diversified customers’ needs, and strengthening its brand image worldwide (Canon overview, 2014). In 2013, Canon generated revenues of JPY373180 million, increasing 7.2% over 2012 after three years’ decline (see Figure 1). Canon operates three business segments: office business unit, imaging system business unit and industry and others business unit (Canon annual report, 2013). In 2013, each segment accounted for 53.6%, 38.8% and 10% revenues respectively (see Figure 2).