IHI: F3/27 1Q Results: Start to the Year in Range of Expectations, Scope for Improvement too

Research evidence excerpt

M

Update

August 5, 2026 08:12 AM GMT

Morgan Stanley MUFG Securities Co., Ltd.+

IHI (7013) | Japan

Takeshi Kitaura

Equity Analyst

F3/27 1Q Results: Start to the

Year in Range of Expectations,

Scope for Improvement too

Morgan Stanley Asia Limited+

Lisa Jiang

Equity Analyst

Morgan Stanley MUFG Securities Co., Ltd.+

Takumi Okano

Research Associate

AlphaSignals Earnings Reaction

Unchanged

Meaningful upside

Modest revision higher

Impact to our thesis

Financial results versus consensus

Direction of next 12-month

consensus EPS

Source: Company data, Morgan Stanley Research

Key Takeaways

1Q OP of ¥73.2bn was somewhat below plan for ¥78.0bn but above the

Bloomberg consensus for ¥57.0bn.

¥40bn in gains on asset sales were lower than the plan for ¥50bn but otherwise

profit in real terms was healthier than the firm envisaged.

IHI (7013.T, 7013 JT)

Heavy Industries | Japan

Stock Rating

Industry View

Price target

Shr price, close (Aug 5, 2026)

Mkt cap, curr, basic (bn)

Avg daily trading value (bn)

Overweight

Attractive

¥3,300

¥2,692

¥2,852.9

¥94.9

While IHI has revised up for FY OP by ¥10bn, mainly relating to Aero Engine,

Space & Defense, maintenance of the ¥20bn buffer may leave room for further

hikes.

1Q results impression: Though 1Q OP was somewhat lower than the co. plan, this

mainly related to differences in the sum of asset sales booked, and in real terms 1Q

made a stronger start than the firm envisaged. 1Q profit in Aero Engine, Space &

Defense included ¥3bn of the ¥7bn in profit-dampening effects of new products

that the firm foresees for the full year, but while this moderated profit growth in 1Q,

with remaining effects spread out over 2-4Q pressure from costs is expected to

ease. After-market business saw a ¥4.3bn profit boost, but our impression is that

costs ran somewhat high in relation to the FY plan, so that the scale of profit

growth could improve from 2Q. Industrial Systems & General-purpose Machinery

stepped in to make up for the lack of powerful growth in Aero Engine, Space &

Defense, apparently seeing effects of improved pricing for automotive

turbochargers and lower fixed costs. The situation in the Middle East did not have a

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