Morningstar

Morningstar, Inc.

Equity Bottom-Up

Mitsui, one of Japan's oldest and largest general trading companies, has grown into a global conglomerate with diversified operations in trading, energy, mineral and metal resources, infrastructure, agricultural production, chemicals, and healthcare.In recognition of the burgeoning emerging-markets appetite for natural resources, Mitsui is determined to secure a stable supply of commodities and energy for the export-oriented Japanese economy. Aided by low-cost funding and impressive…

We continue to see no-moat Mitsui as overvalued following the fiscal year ended March's net profit of JPY 414 billion, which was down 1% year over year. Stripping out a one-off loss of JPY 20.6 billion due to the fire at Intercontinental Terminals Company in March, results were largely within our expectations. Earnings from its metal resources segment were down 35%, but this was due to the absence of a valuation gain that had lifted fiscal 2018 earnings. Mitsui otherwise got a boost from the…

<p>No-moat Mitsui’s cumulative nine-month fiscal 2019 (ending March) net profit of JPY 350 billion, down 6% year over year, was within our expectation. After fine-tuning our earnings model to incorporate our latest commodity price deck and lower dividend from Vale, we keep our fair value estimate of JPY 1,530. Our bearish view on the firm is unchanged given its high exposure to energy and mining businesses. We believe Mitsui’s profitability will be constrained by our below-consensus midcycle…</p>

<p>There was no major surprise in Mitsui’s first-half fiscal 2019 (ending March) results, with net profit down 6% year over year to JPY 223 billion, largely due to the absence of oneoff gains. After incorporating our latest commodity price deck to reflect higher near-term prices, we raise our fiscal 2019-20 earnings forecasts by 8%-15% and increase our fair value estimate to JPY 1,530 from JPY 1,460. We think the shares are overvalued given its high exposure to energy and mining businesses, as our…</p>

Japan

MITSUI & CO., LTD. is a general trading company.  The Company has operating groups including Iron and Steel, Non-Ferrous Metals, Machinery, Chemicals, Foods, Energy, Textiles, and General Merchandise.  Mitsui also operates real estate and overseas development projects.

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