Focusing on next Defense Buildup Program

Research evidence excerpt

Focusing on next Defense Buildup Program

Global Markets Research

17 June 2026Tokyo Keiki

7721.T 7721 JP / EQUITY: JAPAN CONSUMER ELECTRONICS

RatingFocusing on next Defense Buildup Program Remains Buy

Target price JPY 7,500 RemainsWe expect defense budget to be increased over medium term

Closing price JPY 5,290We expect defense, communications, and marine businesses to continue to 16 June 2026

perform well

We expect earnings from 27/3 to also be driven by aircraft and naval equipment among Implied upside +41.8%

defense equipment, products for SAR satellites among communications equipment, and

autopilot systems that benefit from new shipbuilding demand among marine systems. We

think the next Defense Buildup Program is likely to be drawn up one year ahead of

schedule, at which time we envision a further increase in the annual budget from current Relative performance chart

levels, and we thus assume order conditions will be favorable from around 28/3.

We obtain our target price of ¥7,500 by multiplying our 27/3 EPS forecast of ¥312.8 by a

P/E of about 24x (just over 21x previously), one standard deviation above the average of

around 19x since the current Defense Buildup Program was approved by the Cabinet in

December 2022. We reiterate our Buy rating.

Outline of next Defense Buildup Program

If the next Defense Buildup Program is brought forward, we would expect the Cabinet to

approve revisions to the three key defense policy documents at end-2026, and we would

expect the outlines of the next Defense Buildup Program to gradually emerge with the

Ministry of Defense (MOD) making its FY26 budget requests and the Cabinet drawing up

detailed policies for 17 strategic areas in the summer, and the expert panel and other Source: LSEG, Nomura

parties holding meetings around autumn.