Senior Technology Analyst, Japanese Equities, LightStream Research

Scott Foster

Senior Technology Analyst, Japanese Equities

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Equity Bottom-Up

Mitsubishi Heavy Industries / Equity Bottom-Up

<ul>
<li>MHI is selling at 9.9x EPS guidance and 0.7x book value, with a dividend yield of 3.0%. We see potential upside of at least 25% beyond the New Years bounce.</li>
<li>The shares have underperformed for several years due to serious managerial errors. But the mess is being cleaned up and new growth opportunities have emerged.</li>
<li>Risks include limited margins in the energy and aerospace &amp; defense sectors and the possibility of renewed investment in the failed regional jet aircraft project.</li>
</ul>


MHI is selling at 9.9x EPS guidance and 0.7x book value, with a dividend yield of 3.0%. We see potential upside of at least 25% beyond the New Years bounce.
The shares have underperformed for several years due to serious managerial errors. But the mess is being cleaned up and new growth opportunities have emerged.
Risks include limited margins in the energy and aerospace &amp; defense sectors and the possibility of renewed investment in the failed regional jet aircraft project.


MHI (7011 JP): Opportunity or Value Trap?

Japan Specialist

Mark Chadwick

<ul>
<li>MHI's stock fell 7% following the announcement of results. Guidance for FY3/25 missed analyst expectations</li>
<li>Even so, MHI remains a key beneficiary of the global shift to clean energy and national policies aimed at bolstering national security </li>
<li>We remain bullish. The stock has performed well this year and but 13x EV/EBIT seems reasonable given the structural drivers</li>
</ul>


MHI's stock fell 7% following the announcement of results. Guidance for FY3/25 missed analyst expectations
Even so, MHI remains a key beneficiary of the global shift to clean energy and national policies aimed at bolstering national security 
We remain bullish. The stock has performed well this year and but 13x EV/EBIT seems reasonable given the structural drivers


<ul>
<li>MHI's share price has risen more than 60% year-to-date and nearly tripled over the past 12 months on the improving outlook for Japanese defense contractors.</li>
<li>A huge increase in new orders, prospects for a doubling of sales and a rapidly rising operating margin on Aircraft, Defense &amp; Space have been factored into the price.</li>
<li>The shares do not look expensive compared with international comparables, but neither are they particularly cheap. Potential problems, from Japanese defense budget constraints to production glitches, have been ignored. </li>
</ul>


MHI's share price has risen more than 60% year-to-date and nearly tripled over the past 12 months on the improving outlook for Japanese defense contractors.
A huge increase in new orders, prospects for a doubling of sales and a rapidly rising operating margin on Aircraft, Defense &amp; Space have been factored into the price.
The shares do not look expensive compared with international comparables, but neither are they particularly cheap. Potential problems, from Japanese defense budget constraints to production glitches, have been ignored. 


Mitsubishi Heavy Industries (7011 JP): Take Profits and Wait for Reality to Catch Up

Thematic (Sector/Industry)

<ul>
<li>The power outage warning in Japan on March 22 highlights the precarious nature of energy security in Japan.  </li>
<li>The electricity supply issues come at a time when Japan grapples with high oil prices, Russian imports and still idled nuclear capacity. </li>
<li>The public attitude towards nuclear restarts is turning more positive. The primary beneficiaries will be <a href="https://www.smartkarma.com/entities/mitsubishi-heavy-industries" target="_blank" data-smartkarma-citation="entities:13613:1" rel="noopener">Mitsubishi Heavy Industries (7011 JP)</a> , <a href="https://www.smartkarma.com/entities/hitachi-ltd" target="_blank" data-smartkarma-citation="entities:7797:1" rel="noopener">Hitachi Ltd (6501 JP)</a> , and <a href="https://www.smartkarma.com/entities/toshiba-corp" target="_blank" data-smartkarma-citation="entities:637:1" rel="noopener">Toshiba Corp (6502 JP)</a> </li>
</ul>


The power outage warning in Japan on March 22 highlights the precarious nature of energy security in Japan.  
The electricity supply issues come at a time when Japan grapples with high oil prices, Russian imports and still idled nuclear capacity. 
The public attitude towards nuclear restarts is turning more positive. The primary beneficiaries will be Mitsubishi Heavy Industries (7011 JP) , Hitachi Ltd (6501 JP) , and Toshiba Corp (6502 JP) 


Is Japan Falling Back in Love with Nuclear Energy?

Japanese Equity Specialist, Ortus Advisors

Andrew Jackson

Japanese Equity Specialist

Ortus Advisors

<ul>
<li>Mixed signals for JP semi's with the positive read from ASML set to be tempered by the AMAT numbers.</li>
<li>Trump cutting the $7.5k EV tax credit hitting Tesla, Rivian and power semi's.</li>
<li>Govt. names down on concerns over what Musk's DOGE means for Govt spending.</li>
</ul>


Mixed signals for JP semi's with the positive read from ASML set to be tempered by the AMAT numbers.
Trump cutting the $7.5k EV tax credit hitting Tesla, Rivian and power semi's.
Govt. names down on concerns over what Musk's DOGE means for Govt spending.


Japan Morning Connection: SPE Continues to Be Under Pressure

Japan

Mitsubishi Heavy Industries, Ltd. is a comprehensive heavy machinery maker. The Company manufactures machinery, ships, turbines and engines, prime movers, aircrafts, and machine parts for military and commercial use.  Mitsubishi Heavy Industries also researches and develops nuclear power plants.

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Mitsubishi Heavy Industries (7011 JP)

MHI (7011 JP): Opportunity or Value Trap?

A New Year bounce indicates interest in the combination of low valuation, restructuring and new opportunities at MHI. The risk is that inherently...

Scott Foster

Mitsubishi Heavy (7011) | Flying High

We remain bullish. The stock has performed well this year and but 13x EV/EBIT seems reasonable given the structural drivers

Mark Chadwick