Equity Long-Short

Mo Aziz

Equity Bottom-Up

Kawasaki Heavy Industries / Equity Bottom-Up

<ul>
<li>KHI raises ¥200 billion via new shares and convertible bonds; stock drops 7.3% — dilution impact on FY2027F EPS is approximately 4–5%, not the 7% the market just priced.</li>
<li>Capital deployed into aircraft engines, gas turbines, semiconductor robots, and hydrogen — all direct beneficiaries of Japan's ¥9tn annual defense budget and PM Takaichi's ¥370tn strategic spending plan through FY2040.</li>
<li>Placement targets overseas institutional investors; block pricing and secondary market dislocation offer a rare same-day entry into a consensus BUY at a 40%-plus discount to the average analyst TP ¥3,810.</li>
</ul>


KHI raises ¥200 billion via new shares and convertible bonds; stock drops 7.3% — dilution impact on FY2027F EPS is approximately 4–5%, not the 7% the market just priced.
Capital deployed into aircraft engines, gas turbines, semiconductor robots, and hydrogen — all direct beneficiaries of Japan's ¥9tn annual defense budget and PM Takaichi's ¥370tn strategic spending plan through FY2040.
Placement targets overseas institutional investors; block pricing and secondary market dislocation offer a rare same-day entry into a consensus BUY at a 40%-plus discount to the average analyst TP ¥3,810.


Kawasaki Heavy Industries (7012 JP) — ¥200B Capital Raise: Dilution Overpriced, Entry Undervalued

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.

<ul>
<li>KHI has opened a Physical AI Center in Silicon Valley, where it will collaborate with Nvidia, Analog Devices, Microsoft and Fujitsu</li>
<li>The Kawasaki Physical AI Center will first work on robotic surgery and hospital process management, then move on to semiconductors, mobility and other applications.</li>
<li>This should high standards of accuracy and reliability for all KHI robotics and other AI-enabled products. </li>
</ul>


KHI has opened a Physical AI Center in Silicon Valley, where it will collaborate with Nvidia, Analog Devices, Microsoft and Fujitsu
The Kawasaki Physical AI Center will first work on robotic surgery and hospital process management, then move on to semiconductors, mobility and other applications.
This should high standards of accuracy and reliability for all KHI robotics and other AI-enabled products. 


Asia L/S Equity PM/Macro/Thematic Idea Generation

Rikki Malik

Thematic (Sector/Industry)

<ul>
<li>Increasing Nuclear energy use is a key platform for PM Takaichi</li>
<li>Recent geopolitical events will likely accelerate this push for energy security</li>
<li>We introduce a basket of stocks to benefit from this theme</li>
</ul>


Increasing Nuclear energy use is a key platform for PM Takaichi
Recent geopolitical events will likely accelerate this push for energy security
We introduce a basket of stocks to benefit from this theme


Critical Mass - Japan's Nuclear Renaissance and the Supply Chain Stocks to Play It.

Japan Specialist

Mark Chadwick

<ul>
<li>
 Valuation disconnect: At 10× EV/EBITDA, KHI trades too cheaply given 21% defense exposure and highest forward EBITDA growth among Japanese heavy industrials.</li>
<li>
 Technical oversold: Down 15% versus market -1%, with RSI at 35 suggesting excessive selling relative to fundamentals and peer declines of 10-11%.</li>
<li>
 Aerospace recovery ahead: Commercial travel rebound, end of PW1100G losses, and defense production growth should drive margin expansion despite weak Q2 results.</li>
</ul>



 Valuation disconnect: At 10× EV/EBITDA, KHI trades too cheaply given 21% defense exposure and highest forward EBITDA growth among Japanese heavy industrials.

 Technical oversold: Down 15% versus market -1%, with RSI at 35 suggesting excessive selling relative to fundamentals and peer declines of 10-11%.

 Aerospace recovery ahead: Commercial travel rebound, end of PW1100G losses, and defense production growth should drive margin expansion despite weak Q2 results.


KHI (7012): Oversold on Governance Fears, Undervalued on Defense Growth

Japanese Equity Specialist, Ortus Advisors

Andrew Jackson

Japanese Equity Specialist

Ortus Advisors

<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

Japan

Kawasaki Heavy Industries, Ltd. designs, develops, and manufactures transport equipment and industrial heavy machinery for military and commercial use.  The Company produces ships, railroad cars, aircraft engines and parts, hydraulic and gas turbines, submarine engines, boilers, and industrial robots.  Kawasaki Heavy Industries offers engineering and construction services to industrial plants.

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Kawasaki Heavy Industries (7012 JP)