Industrial Data & Stock Preference: June

Research evidence excerpt

Industrial Data & Stock Preference: June

Japan | Capital Goods EquityJuneResearch19, 2026

Chart 1 - Cycle of Production EquipmentIndustrial Data & Stock Preference: June 25%

20% Downcycle Peak

15%

Early-cycle data up to May suggests a market upcycle. This has hyped up 10% Bottom Upcycle

(%) 5%

YoY 0%Buy-side expectations on factory automation sector stocks. Late-cycle data

Inventory -5% Feb 2026 Jan 2026

-10% Mar 2026such as Japan's exports of gas turbines continued rising in April. Record- -15% Apr 2026

-20% Jan 2021

-30% -20% -10% 0% 10% 20% 30% 40% 50% 60%high data center spending looks supportive. As of 18 June, Harmonic Drive . Shipment YoY (%)

Systems is our top pick. Market talk on non-traditional-robotic applications Source: METI, Jefferies estimates

such as humanoid, aerospace, and defense should keep the stock under Chart 2 - Industrial Output: Production

the spotlight. Equipment50% [YoY Growth of IPI Shipment - YoY Growth of IPI Inventory]

40% Production Equipment

30%

Market sentiment: Investor feedback enhanced our view that a bull-case scenario for early- 20%10%

2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026cycle stocks, e.g., factory automation sector, is reflected in the consensus forecasts. While -10%0%

we do not think investors will turn bearish on these stocks before seeing positive earnings -20%-30%

and orders in this quarter, investors may have started to examine which companies can beat . -40%-50%

market expectations meaningfully. In the factory automation sector, Harmonic Drive Systems Source: Ministry of Economy, Trade and Industry, Jefferies

('HDS'; 6324 JP) and CKD (6407 JP) were the only two outperformers against the TOPIX vs a

Chart 3 - Japan Machine Tool Industry Orders