Profits continue to rise in Vietnam and US on strong demand

Research evidence excerpt

Profits continue to rise in Vietnam and US on strong demand

Global Markets Research

27 July 2026Kyoei Steel

5440.T 5440 JP / EQUITY: JAPAN STEEL, NONFERROUS METALS, WIRE & CABLE

RatingProfits continue to rise in Vietnam and US on

Remains Neutralstrong demand

Target price

We see Q1 as major bottom for spreads in Japan, but further price hikes Increased from 1,940 JPY 2,150

may be necessary as major recovery in demand looks unlikely

Closing price JPY 1,894We remain Neutral, think that Q1 marked a major bottom in Japan but do not expect 24 July 2026

US investment to contribute to earnings until at least 2028

While Kyoei Steel's operations in Vietnam continue to improve, we revise our forecasts to Implied upside +13.5%

reflect weak spreads and the demand climate in Japan, and retain our Neutral rating.

Having rolled forward the base year, we obtain our target price of ¥2,150 by multiplying

our 27/3 EPS forecast by a P/E of around 13x. We continue to apply a 20% discount to the

average P/E versus the Russell/Nomura Large Cap materials sector. While we see Q1 as Relative performance chart

the bottom for spreads in Japan in the near term, we think any reassessment of the stock

will hinge on: (1) increased sales in Japan of ethical steel that includes value-added such

as low CO2 emissions and medical waste recycling; and (2) substantive improvements in

earnings from 2028 onwards from major investments in the US.

27/3: We expect Vietnam and US to drive profit growth, see weak spreads in Japan

We forecast 27/3 operating profits of ¥15.2bn (down 10% y-y), up y-y at the overseas steel

business, particularly in Vietnam and the US, but down in Japan owing to weaker spreads

and higher electricity costs. We forecast operating profits of ¥8.0bn (up 89%) in Vietnam