Global Materials | Industrials | Commodities

Rahul Jain

Equity Bottom-Up

<ul>
<li>Q1 FY2026 results showed weak earnings (net profit –38% YoY) but a strong +29% YoY orderbook driven by Aero &amp; Carbon Solutions.</li>
<li>Management retained FY2026 guidance, banking on aero aftermarket growth and disposal gains to drive a backloaded recovery.</li>
<li>Valuations (~14× EV/EBITDA, 24× P/E) look reasonable versus peers, but execution risks remain if disposals or aero demand underdeliver.</li>
</ul>


Q1 FY2026 results showed weak earnings (net profit –38% YoY) but a strong +29% YoY orderbook driven by Aero &amp; Carbon Solutions.
Management retained FY2026 guidance, banking on aero aftermarket growth and disposal gains to drive a backloaded recovery.
Valuations (~14× EV/EBITDA, 24× P/E) look reasonable versus peers, but execution risks remain if disposals or aero demand underdeliver.


IHI Corporation (7013 JP) – Strong Orders, Weak Profits; Guidance Backloaded on Aero & Disposals

Japanese Equity Specialist, Ortus Advisors

Andrew Jackson

Japanese Equity Specialist

Ortus Advisors

Thematic (Sector/Industry)

<ul>
<li>MoD set to designate China as Japan's most serious concern in upcoming white paper. MHI, KHI, IHI and JSW worth watching as retail looks for new plays.</li>
<li>SMCI announcing plans to raise $7 billion to meet server orders may help lift Nidec who supplies their cooling modules.</li>
<li>Sumitomo Forestry -31% YTD may get some relief from homebuilder strength in the US overnight.</li>
</ul>


MoD set to designate China as Japan's most serious concern in upcoming white paper. MHI, KHI, IHI and JSW worth watching as retail looks for new plays.
SMCI announcing plans to raise $7 billion to meet server orders may help lift Nidec who supplies their cooling modules.
Sumitomo Forestry -31% YTD may get some relief from homebuilder strength in the US overnight.


Japan Morning Connection: Defense in Focus as MoD Is Set to Name China as Most Serious Concern

<ul>
<li>Global defense names continued to trade well which bodes well for the Japanese heavies and shipbuilders.</li>
<li>Airlines failed to catch a bid although global shippers were mixed which points to further uncertainty amid oil volatility.</li>
<li>Broadcom numbers look good with the firm eyeing $100bn in AI chip revenues by next year.</li>
</ul>


Global defense names continued to trade well which bodes well for the Japanese heavies and shipbuilders.
Airlines failed to catch a bid although global shippers were mixed which points to further uncertainty amid oil volatility.
Broadcom numbers look good with the firm eyeing $100bn in AI chip revenues by next year.


Japan Morning Connection: Markets Stage a Cautious Rebound in the US

<ul>
<li>NVDA investment in Lumentum and Coherent increases the focus on optical over copper connectivity technologies.</li>
<li>Shipper strength on the prospect for higher rates should continue to be reflected in Japan names.</li>
<li>Defense names were obviously strong following gains in Asia yesterday, but geospatial imaging names lead the way.</li>
</ul>


NVDA investment in Lumentum and Coherent increases the focus on optical over copper connectivity technologies.
Shipper strength on the prospect for higher rates should continue to be reflected in Japan names.
Defense names were obviously strong following gains in Asia yesterday, but geospatial imaging names lead the way.


Japan Morning Connection: Markets Firm in the Face of War with Momentum and Growth Outperforming

<ul>
<li>Watch refiners, shippers, and heavies for upside vs weakness for airlines and companies with shipping exposure to EU.</li>
<li>This rotation could be short lived given the very one-sided outcome of the conflict so far, so expect volatility.</li>
<li>Precious metals and oil are already starting to pare early gains this morning which may be indicative of the longevity of some of these moves.</li>
</ul>


Watch refiners, shippers, and heavies for upside vs weakness for airlines and companies with shipping exposure to EU.
This rotation could be short lived given the very one-sided outcome of the conflict so far, so expect volatility.
Precious metals and oil are already starting to pare early gains this morning which may be indicative of the longevity of some of these moves.


Japan Morning Connection: Japan Set for Short-Term Rotation Away from Tech After Attacks on Iran

Japan

IHI Corporation manufactures heavy machinery. The Company produces aircraft jet engines, rocket propulsion systems, and ships for military and commercial use. Ishikawajima-Harima also constructs petroleum refineries and nuclear power plants.

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IHI Corp (7013 JP)

IHI Corporation (7013 JP) – Strong Orders, Weak Profits; Guidance Backloaded on Aero & Disposals

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Rahul Jain

Japan Morning Connection: Defense in Focus as MoD Is Set to Name China as Most Serious Concern

Markets remain gun-shy ahead of SpaceX IPO this week. Defense heavies worth watching as MoD prepares to flag China as most serious concern in...

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Japan Morning Connection: Markets Stage a Cautious Rebound in the US

Markets stage a cautious rebound in the US, but there are plenty of opportunities in Japan after the weak price action so far this week.

Andrew Jackson

Japan Morning Connection: Markets Firm in the Face of War with Momentum and Growth Outperforming

Markets were surprisingly calm overnight with tech and AI hardly skipping a beat in the face of war in Iran. Airlines were lower with dented demand...

Andrew Jackson

Japan Morning Connection: Japan Set for Short-Term Rotation Away from Tech After Attacks on Iran

Expect a fairly sharp rotation away from tech and AI into defense and defensives names in Japan today. JP defense names are all trading close to...

Andrew Jackson

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