Japan Specialist

Mark Chadwick

Equity Bottom-Up

<ul>
<li>
 Defense expansion priced in: JSW remains a key beneficiary of Japan’s multi-year defense buildup, but recent political optimism has driven valuations ahead of fundamentals.</li>
<li>
 Structural growth secured: Medium-term defense sales set to more than double by FY2028, supported by artillery dominance, APC production, and new railgun development projects.</li>
<li>
 Valuation headwinds: Even under bullish growth and margin assumptions, DCF implies ¥8,000 fair value; current 20x EV/EBITDA multiple looks rich versus domestic peers.</li>
</ul>



 Defense expansion priced in: JSW remains a key beneficiary of Japan’s multi-year defense buildup, but recent political optimism has driven valuations ahead of fundamentals.

 Structural growth secured: Medium-term defense sales set to more than double by FY2028, supported by artillery dominance, APC production, and new railgun development projects.

 Valuation headwinds: Even under bullish growth and margin assumptions, DCF implies ¥8,000 fair value; current 20x EV/EBITDA multiple looks rich versus domestic peers.


Global Materials | Industrials | Commodities

Rahul Jain

<ul>
<li>Macro: Nuclear restarts (Tomari-3, Aug-25) and record defense budgets underpin demand for JSW’s forgings.</li>
<li>Results: Q1 FY25 showed solid YoY growth (revenue +7%, OP +21%) with margins lifted by defense/nuclear.</li>
<li>Valuation/Risks: Shares trade at ~26× P/E on a ¥508 bn backlog; upside rests on execution, with delays the key risk.</li>
</ul>


Macro: Nuclear restarts (Tomari-3, Aug-25) and record defense budgets underpin demand for JSW’s forgings.
Results: Q1 FY25 showed solid YoY growth (revenue +7%, OP +21%) with margins lifted by defense/nuclear.
Valuation/Risks: Shares trade at ~26× P/E on a ¥508 bn backlog; upside rests on execution, with delays the key risk.


JSW: Backlog 2× Sales, Nuclear Edge Drives Upside

<ul>
<li>Strong earnings momentum with revenue, margins, and EPS consistently improving over FY21–FY25, driven by a shift toward high-margin industrial machinery.</li>
<li>Strategic monopoly in ultra-large nuclear forgings, supported by global SMR tailwinds, capacity expansion plans, and a record order backlog across nuclear and defense.</li>
<li>Valuations remain elevated, but are backed by strong visibility, margin expansion, and structurally advantaged positioning in a tightening global supply chain.</li>
</ul>


Strong earnings momentum with revenue, margins, and EPS consistently improving over FY21–FY25, driven by a shift toward high-margin industrial machinery.
Strategic monopoly in ultra-large nuclear forgings, supported by global SMR tailwinds, capacity expansion plans, and a record order backlog across nuclear and defense.
Valuations remain elevated, but are backed by strong visibility, margin expansion, and structurally advantaged positioning in a tightening global supply chain.


Japan Steel Works (5631 JP) – Steady Profit Growth, Nuclear Edge, and Premium Justified

<ul>
<li>Defense Windfall: JSW dominates Japan’s artillery market, set to benefit as defense spending triples, driving a 232% surge in defense sales to 80 billion yen by 2028.</li>
<li>Strategic Expansion: Exclusive forging capabilities secure JSW’s artillery monopoly, while investments in railguns and next-gen armoured vehicles fuel long-term growth.</li>
<li>Energy Tailwinds: JSW’s nuclear and offshore wind expertise ensures stable revenue, with reactor restarts and turbine foundations boosting its power segment’s profitability.</li>
</ul>


Defense Windfall: JSW dominates Japan’s artillery market, set to benefit as defense spending triples, driving a 232% surge in defense sales to 80 billion yen by 2028.
Strategic Expansion: Exclusive forging capabilities secure JSW’s artillery monopoly, while investments in railguns and next-gen armoured vehicles fuel long-term growth.
Energy Tailwinds: JSW’s nuclear and offshore wind expertise ensures stable revenue, with reactor restarts and turbine foundations boosting its power segment’s profitability.


Japan Steel Works (5631) | Artillery Giant Reloads for Growth

Research and consultancy, Tabbush Report

Daniel Tabbush

Research and consultancy

Tabbush Report

We provide research and consultancy on Asian banks. Our focus is on what we call “Asian bank research, without the noise.” We are interested in the most critical swing-factors for banks, the NPL and credit cycle, and where we believe there is a gap between perception and reality. We often focus on the less studied components of bank financial statements.  Our research is highly thematic, sometimes examining unlisted banks and companies as a window on mainstream banks. 

Being independent allows us to look at smaller banks, often overlooked by others. Analysis of BIS bank guidelines in the context of Asia, is also a focal point, while we also analyze global banks operating in the region. We use what we believe is the most comprehensive, reliable financials database, SNL Financial. S&P Capital IQ augments our database, with corporate data and CEIC, with economics. 

Asian bank research, without the noise.

<ul>
<li>Profit continues to expand at Mitsui E&amp;S after its transition to a holding company, now reporting over 400% profit growth for 9 months YTD. </li>
<li>The company is doing well to keep its operating costs down, with an improving funding structure and balance, as its revenue grows more than COGs.</li>
<li>We wonder if there will be more revisions upward to profit, with new initiatives and with a more proven recent track record.</li>
</ul>


Profit continues to expand at Mitsui E&amp;S after its transition to a holding company, now reporting over 400% profit growth for 9 months YTD. 
The company is doing well to keep its operating costs down, with an improving funding structure and balance, as its revenue grows more than COGs.
We wonder if there will be more revisions upward to profit, with new initiatives and with a more proven recent track record.


Mitsui E&S - Near Record ROE as Profit Continues to Expand From Multiple Drivers

Japan

The Japan Steel Works Ltd produces machinery for casts, forged steel, and plastics.  The Company, serving both the public and private sectors, manufactures industrial equipment utilized in facilities such as oil refineries, manufacturing plants, and petrochemical plants.

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Japan Steel Works (5631 JP)

Japan Steel Works (5631) | Play Defense

JSW benefits from Japan's defense expansion, but overvaluation may be a concern as political optimism drives up prices ahead of fundamentals.

Mark Chadwick

JSW: Backlog 2× Sales, Nuclear Edge Drives Upside

Strong demand for JSW's forgings driven by nuclear restarts and record defense budgets, Q1 FY25 results show solid growth with margins lifted by...

Rahul Jain