Investor Presentation: Heavy Industries: Energy & Defense Drive Profit; Overweight on MHI, Equal-weight on IHI and KHI

Research evidence excerpt

Investor Presentation: Heavy Industries: Energy & Defense Drive Profit; Overweight on MHI, Equal-weight on IHI and KHI

Foundation

May 15, 2026 07:36 AM GMTM

Investor Presentation | Japan Morgan Stanley MUFG Securities Co., Ltd.+ Takeshi Kitaura

Equity Analyst

Heavy Industries: Energy & Defense Drive Profit; Takeshi.Kitaura@morganstanleymufg.comMorgan Stanley Asia Limited+ +81 3 6836-5427

Lisa Jiang

Equity AnalystOverweight on MHI, Equal-weight on IHI and KHI Lisa.Jiang1@morganstanley.com +852 2239-1282

Morgan Stanley MUFG Securities Co., Ltd.+

Daisuke Horiuchi

Research Associate

Daisuke.Horiuchi@morganstanleymufg.com +81 3 6836-5428

Heavy Industries

Industry View: Attractive Japan

Industry View Attractive

• Opportunities: Higher domestic defense spending, tapping export demand following the easing of the “five categories” restrictions,

and stronger demand for power generation equipment from around 2030 as AI-driven electricity demand continues to expand.

• Risks: Production disruptions (including supply chain constraints) stemming from worsening Middle East tensions; the risk of

capacity growth in defense and energy falling short of our assumptions; disruption related to rare earth imports; and the possibility

that increased defense spending is allocated outside the core production domains of the three companies.

Mitsubishi Heavy Industries – OW, PT ¥5,500 (F3/28e EPS ¥137.6 x P/E 40x)

• Further scope to expand defense equipment orders as the government eases the “five categories” restrictions and lifts defense

spending. Replenishment of missile inventories driven by Middle East tensions could also support domestic and overseas shipments.

• Around half of profit comes from Energy Systems and around 20% from defense, both with high order backlogs, providing relative