Daily Brief Japan: Mitsubishi Heavy Industries, TSE Tokyo Price Index TOPIX, Mizuho Financial Group and more

In today’s briefing:

MHI (7011) | Rockets and Renewables
ROE Isn’t Rising Because Managers Don’t Think of the Value of the Company and Meaning of the Listing
Mizuho – Expect Profit Guidance Surge | JGBs Up, JGBs Unrealized Losses Down | Credit Metrics Better

MHI (7011) | Rockets and Renewables

MHI reports impressive YoY growth in order intake, revenues, and profits across Energy Systems and Defense Equipment segments in Q2 2023.
Despite a 62% YTD stock price increase, strong order backlog and underlying drivers suggest resilience in a challenging economic climate.
The company benefits from global trends in decarbonization and increased national security spending, positioning itself as a leader in gas turbines and defense technology.

Even after the “TSE’s request,” the average P/B of listed companies has not increased. In addition, ROE, which can be considered a driver for corporate value expansion, has remained flat.
Japanese managers tend to be caught up in formalistic thinking about whether or not a company is listed, and whether or not it’s listed on the highest market or not.
Instead of being caught up in formalistic thinking, I would like managers to seriously rethink the value of the company and what it means to be listed.

Mizuho Financial Group (8411 JP) can see higher profit guidance change than many in Japan, the region, given its first quarter was 40% of full-year guidance
Riding JGB yields will support this, with less loans to total financial assets, and the bank has even seen its unrealized losses on JGBs decline. Good ALM.
Credit metrics are better. Its credit costs are in reversal. This can continue or at least remain low. This is supported by granular, macro data.

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