electronics for imaging: positioned correctly for the digital printing revolution
Is a company that prepares for growth with changes in the field of industrial and ceramic printing.
Over the years, printing has been done through analog devices that are customized using different presses.
The industry is changing the digital printing mechanism that uses digital customization functions instead of printing machines.
Over the years, the problem has been the detail of digital printing and the lack of performance compared to analog printing.
However, EFII is a high-end product in the industry, and we believe that the combination of its value and growth is attractive.
We see three major catalysts driving growth forward: the revolution in ceramic printing, the ability of the company to provide a changing advertising model, and the company\'s LED cooling system.
The two initiatives are key to the company.
Analysts at Smithers PiraMost like to focus on digital printing because it can attract signage and advertisers.
One interesting area that EFII is attacking is the tile industry.
Last year, the company acquired a company called CretaPrint.
It is very attractive because it is a digital ceramic printing company.
The company\'s EFI CretaPrint C3 is a product of EFI\'s technology and software combined with the ceramic printing of create print.
The combination of the two creates an amazing product that can print tiles using a digital printing system.
The company combines tile printing with their fiery software, the backbone of the company.
What is the opportunity here?
At present, only 25% of the tile business is digital printing, EFII noted.
At the same time, the tile industry is stepping out of the Western world and entering emerging markets such as China, Mexico, Brazil and Turkey.
This means that, first of all, the industry is transforming to digital, and at the same time, as this transformation occurs, there is a lot of cyclical growth in the new printers purchased.
As one of the leaders in the tile printing industry, EFII is right in the middle of the industry.
EFII believes that the tile digital printing industry is likely to double in the next decade, and the industry is moving in this direction. Dr.
Ray Work of Work Associates, a digital printing consulting firm, notes that the industry is undergoing a huge shift from analog to digital, tile manufacturers can see in six months that their investment in digital printers is rewarded.
Also, once they work with EFII, the company has access to the latest software and updates that will continue to improve their productivity.
The biggest benefit of the tiles, and the reason why we think the EFII will be a great success, is that the ease of changing the design through digital printing is a major benefit.
Not only is the design potential unlimited, but it will take a day to convert on analog devices.
It can take several minutes to convert from a digital printer.
The potential here is huge and the EFII is one of the only ways to reach out directly to the industry.
In addition, there are great obstacles to entry.
The technology is unique and EFII acquired a company that already has more than 1700 customers in CretaPrint.
The whole inkjet industry is a fast growing industry.
At 2011, it\'s just over $ 33B in size.
According to Smithers Pira, it is expected to exceed $ 67B by 2017.
One of the main reasons for this is signage.
The key to the EFII is definitely signage, but since this is an area that is widely understood, we want to reduce the focus on this growth.
More than 50% signs (
And most of EFII\'s current business)
Because digital printers are easy to change the way they print, the cost of the inkjet industry is also cheaper.
It doesn\'t make much sense for the newspaper because the project is too big and it doesn\'t need to change the way it is printed every day.
What we want to focus on, not the potential of signage and consumers --
Marketing is based on the overall transformation of advertising to show the potential of the industry.
One of the reasons why we are too bullish on this business is that the way advertisers and consumer companies reach potential customers has changed.
The electronics industry believes that this business can double in the next three years.
5 years since the old method did not work.
In the past, it was the easiest way to reach consumers through television.
Advertising is very effective in bringing the company\'s brands and products to consumers.
With less and less commercial viewing, less and less attention to commercial advertising, the changes in television have attracted more and more attention from companies.
First of all, people spend less and less time watching TV every week.
Take a look at this chart below: more and more people are turning to the Internet for news and entertainment, and more digital devices are being used.
This figure has increased by 60% in the past year.
The device is constantly being manufactured to make this easier, like my choice, and when a commercial ad appears on the screen, it automatically flips a channel for the customer.
So how can advertisers stand in front of their audience more often? signage.
Marketers are a huge market for EFII and their inkjet revolution.
The product kits offered by electronics are also unique and they have upgraded their software to many other inkjet printers other than EFII dedicated printers.
The company compared their software business (Fiery)
Upgrading cars with new sound systems: We believe that the revolution in television and Internet technology will provide a good way out for the continued demand and growth of the largest component of the EFII business.
Finally, we saw the important catalyst for EFII in their LED cooling software, a very unique product.
Since EFII\'s digital printing is about productivity, automation, and the development of products that allow industrial printers and other printing companies to increase profit margins, one of the company\'s products is more distinctive --
Cool curing technology
Cool curing technology is a green printing solution that focuses on power consumption and less hardware.
The company focuses on developing environmental products.
Friendly cooling technology as well as UV ink products that are attractive to consumers, which the company sees as a place for their business to grow.
The Environmental Protection ink produced by the company does not contain volatile organic matter, 50% of natural monomer, is not considered as hazardous waste, and contains recyclable organic matter.
We believe that providing such products that are not available on other competitor models is a huge victory for the company and a way for them to distinguish themselves.
Looking forward to the future, we expect the company to be in 10-
As at 2017, revenue was 15% euros per year.
Positioned in two major areas of industry growth.
In addition, with the development of the industry, the company\'s ink volume will continue to expand, which will drive the continuous sales of families at a high profit margin.
In the company\'s latest quarter, they saw a 26% annual increase in the amount of inkjet, while their industrial inkjet revenue grew by only 10%.
The company sells a lot of ink just to show you that the company is buying these products at a high level of production and enjoying the use of their products.
Let\'s put all this information into the DCF analytics format to see how much the stock should be worth.
DCF analysis of operating income: We expect operating income to be slightly higher than income, as the company\'s profits will expand as the number of software subscriptions increases and the amount of ink increases.
A conservative model is to estimate the compound growth rate of operating income at 12-14%.
These levels could actually be pushed up to 2015-
2017 as the global macro economy began to sprout more, the industry began to grow strongly and periodically.
Therefore, we can expect operating income to be at a lower level.
About $60 by 2017.
Depreciation: This number should rise as the company expects to continue to acquire more companies in the coming years.
We expect revenue to grow at a similar rate.
We expect a devaluation of about $45 by 2017.
Capital expenditure: this figure should be on the rise every year as we expect more acquisitions to happen in the coming years and the company has shown interest in stock buybacks (
The $100 plan has been launched and it will take several more quarters to complete).
We will use a 5% cap rate, which is also a conservative level of discount to the company.
When we used these numbers in the DCF analysis, we proposed a price target of $41 for the next 12 months.
This level is very conservative and the compound growth rate used may have underestimated the growth.
In addition, if the company can maintain 10-
£ 15% per year, we can expect the company to attract a higher valuation than the current £ 17. 3 P/E and 1. 7 PEG ratio.
From here on, we are a big fan of imaging electronics.
We believe that they are very capable of taking advantage of the strong growth market and that the company will bring very positive returns to investors.
Disclosure: I do not have a position in any of the stocks mentioned, nor do I have a plan to start any position in the next 72 hours.
Business Relationship Disclosure: I have no business relationship with any stock company mentioned in this article.
Niu Group is an analysis team.
This article was written by one of our writers, David Risto.
We have not received compensation for this article (
In addition to Seeking Alpha)
, We have no business relationship with any stock company mentioned in this article.