Global Materials | Industrials | Commodities

Rahul Jain

Equity Bottom-Up

<ul>
<li>BPSL JV gives JFE a scalable India platform, shifting long-term growth away from a stagnant Japan market.</li>
<li>Balance-Sheet impact is manageable, with optional liquidity from the ¥500 bn JSW stake.</li>
<li>Valuation deeply discounted at 0.5× P/B and US$525/t despite rising mix, India optionality, and multi-year earnings normalization.</li>
</ul>


BPSL JV gives JFE a scalable India platform, shifting long-term growth away from a stagnant Japan market.
Balance-Sheet impact is manageable, with optional liquidity from the ¥500 bn JSW stake.
Valuation deeply discounted at 0.5× P/B and US$525/t despite rising mix, India optionality, and multi-year earnings normalization.


JFE Holdings: India JV Resets Long-Term Growth Path; Deep Value with Structural Upside

<ul>
<li>Trough valuations: JFE trades at only US$525/t EV/t and 0.5× P/B, despite stable guidance and improving high-value steel mix.</li>
<li>Hidden value: 15% JSW Steel stake (~¥500 bn) equals ~45% of JFE’s market cap—cheap India exposure with re-rating potential.</li>
<li>Upside case: SOTP implies +50–60% equity upside, supported by 4–5% dividend yield and H2 margin recovery.</li>
</ul>


Trough valuations: JFE trades at only US$525/t EV/t and 0.5× P/B, despite stable guidance and improving high-value steel mix.
Hidden value: 15% JSW Steel stake (~¥500 bn) equals ~45% of JFE’s market cap—cheap India exposure with re-rating potential.
Upside case: SOTP implies +50–60% equity upside, supported by 4–5% dividend yield and H2 margin recovery.


JFE Holdings (5411 JP) – Deep Value with Hidden JSW Optionality

<ul>
<li>Q1 FY2025 was weak with Steel swinging to losses (–¥2,300/t) on spreads, FX, and inventory drag, leaving recovery hinging on H2.</li>
<li>We retain our FY25–28 earnings estimates, assuming stable ~15–16% EBITDA margins and volume growth to 31.6 Mt by FY28.</li>
<li>At ~US$525/t EV/t (adj.), JFE trades at a deep discount to Nippon Steel, but upside depends on spreads stabilizing and tariff risks not worsening.</li>
</ul>


Q1 FY2025 was weak with Steel swinging to losses (–¥2,300/t) on spreads, FX, and inventory drag, leaving recovery hinging on H2.
We retain our FY25–28 earnings estimates, assuming stable ~15–16% EBITDA margins and volume growth to 31.6 Mt by FY28.
At ~US$525/t EV/t (adj.), JFE trades at a deep discount to Nippon Steel, but upside depends on spreads stabilizing and tariff risks not worsening.


JFE Holdings (5411 JP) – Soft Q1 Priced In; Compelling Upside from Lowest EV/Ton in Peers

<ul>
<li>JFE Holdings rebounded from COVID-era losses to deliver peak earnings in FY22, followed by a gradual normalization through FY25, with stable steel volumes but declining margins amid weak domestic demand.</li>
<li>The group is investing ¥970B (~$6.5B) through FY2030 across decarbonization, product upgrades (e.g., electrical steel, galvanizing), and overseas downstream expansion to sustain competitiveness.</li>
<li>Adjusting for its ₹910B (~¥1.7T) JSW stake, ~30% of EV, JFE trades at just 2.7x EV/EBITDA—deeply discounted vs peers like Nippon Steel and POSCO.</li>
</ul>


JFE Holdings rebounded from COVID-era losses to deliver peak earnings in FY22, followed by a gradual normalization through FY25, with stable steel volumes but declining margins amid weak domestic demand.
The group is investing ¥970B (~$6.5B) through FY2030 across decarbonization, product upgrades (e.g., electrical steel, galvanizing), and overseas downstream expansion to sustain competitiveness.
Adjusting for its ₹910B (~¥1.7T) JSW stake, ~30% of EV, JFE trades at just 2.7x EV/EBITDA—deeply discounted vs peers like Nippon Steel and POSCO.


JFE Holdings (5411 JP) – Stable Core, Strategic JSW Stake, and Deep-Value Opportunity

Japanese Turnaround Situations, Short-Ideas, Azabu Research

Michael Allen

Japanese Turnaround Situations, Short-Ideas

Azabu Research

Azabu Research is a publishing and consulting firm focused on distressed equities in the Japanese market. We specialize in turnaround strategies, corporate combinations, divestitures, and restructuring.

Publisher of the Tokyo Turnaround Letter, which conducts the most thorough research possible of publicly available information, including forensic tests for fraudulent overstatement of assets and understatement of liabilities, as well as rigorous market and industry analysis to assess the underlying strengths of the company’s products or services, the appropriateness of the company’s turnaround strategy, and the skill of its current management team. The average length of a report exceeds 25 pages of text and tables, excluding any disclosures or executive summaries.

We have more than 30 years of experience in applying this process to distressed equities in Japan. Additionally, subscribers have free access to detailed, yet easily navigated earnings models for the target company as well as the top five comparable companies, and unlimited access to the analyst for follow-up questions.

Azabu Research also conducts be-spoke research on a project basis, and provides consulting services to companies looking to restructure, divest, make acquisitions, go public, or improve investor sentiment toward their stock.

Independent Research and Consulting Firm

<ul>
<li>2025 will start with more attractive turnaround opportunities than we have seen in a long time. </li>
<li>An uptick in TOBs, MBOs and merger discussions makes it suddenly no longer safe to short low-PBR companies indiscriminately.</li>
<li>Investors are noticing. More than two-dozen large- and medium-cap stocks with deep discounts to the benchmark began to bounce off well-defined support levels in late December.</li>
</ul>


2025 will start with more attractive turnaround opportunities than we have seen in a long time. 
An uptick in TOBs, MBOs and merger discussions makes it suddenly no longer safe to short low-PBR companies indiscriminately.
Investors are noticing. More than two-dozen large- and medium-cap stocks with deep discounts to the benchmark began to bounce off well-defined support levels in late December.


Unloved Japan Round Up Jan. 3: Set Up for A Banner Year?

Japan

JFE Holdings, Inc. is a holding company which was established through the merger of NKK Corp and Kawasaki Steel Corp.  The Company manages and conducts its subsidiaries' business, which is steel production and integrated engineering services.

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JFE Holdings (5411 JP)

JFE Holdings: India JV Resets Long-Term Growth Path; Deep Value with Structural Upside

BPSL JV provides JFE with growth in India, diversifying from slow Japanese market, with manageable balance-sheet impact and discounted valuation.

Rahul Jain