The 720: China & Global Autos, Kioxia, Tencent, Servers, China Spirits, JP Aerospace & Defense, Iluka Resources, Henderson Land

Research evidence excerpt

The 720: China & Global Autos, Kioxia, Tencent, Servers, China Spirits, JP Aerospace & Defense, Iluka Resources, Henderson Land

expect attention to focus on Japan’s

next defense budget and priority investment areas in the second half of the year.

Yuichiro Isayama

Iluka Resources – Signs 4-year auto OEM rare earths offtake agreement – Buy. We

maintain our Buy rating and 12m TP of A$8.80 following Iluka’s announcement of a

binding, four-year take-or-pay offtake agreement with a global automotive company

for 1,200 tonnes of rare earth oxides. This represents roughly 10% of planned

production from the Eneabba refinery and secures a minimum revenue of US$155mn at

floor prices, which implies an attractive basket price of US$129/kg. While we make no

changes to our estimates or net asset value of A$10.60 per share, we view this as a

positive milestone that aligns with the refinery’s mid-2027 commissioning and expect

the company to sign similar contracts covering over 80% of production in the next 6 to

18 months. Paul Young

Japan Shipbuilding – Abundant Catalysts Buoy Medium-Term Earnings Outlook. We

remain bullish on Japanese shipbuilding stocks, as the earnings outlook is moving higher

owing to a favorable order environment and strong policy support. The industry order

backlog remains at a historically high 29.27 million gross tons, securing vessel demand

for the next three and a half years. We see abundant catalysts ahead, including potential

order backlog expansion via capacity enhancements supported by the government’s

Revitalization Fund, and the emergence of domestic and international defense demand.

We reiterate our Buy ratings on Namura Shipbuilding, Mitsui E&S, and Tokyo Keiki,

expecting steady operating profit growth driven by a mix shift to large vessels,