While many electrical construction firms reported record-high profits for FY3/26—fueled by the insatiable power demands of AI data centers—the market has largely “discovered” these names.

My previous pick in this space, Yurtec (1106) (first profiled in 4/24), has performed well, but the valuation is still not demanding.

I have been hunting for ancillary, undiscovered names that benefit from the same tailwinds. I thought I found the perfect candidate in Aichi Corp, which installs aerial work platforms on construction trucks used by electric construction companies. However, after a recent management meeting, the timeline for a rerating appears longer than initially anticipated.

The Near-Term Headwinds

1. The TOPIX Exclusion Risk

The most immediate hurdle is the high likelihood of Aichi being excluded from the TOPIX in 10/26. Management estimates they need to boost their market cap significantly—pushing the share price from ¥1,400 to roughly ¥1,700—to avoid exclusion. Despite efforts to improve ROE, they view this as a “tall order” given the short timeframe. While I believe this risk is largely priced in—supported by a 4.3% dividend yield and a zero-debt balance sheet—the technical selling pressure from index exclusion is a factor which investors must stomach.

2. Labor Constraints Muting Growth

Despite the construction boom, Aichi’s sales growth remains steady rather than explosive. Their core product—aerial work platforms—requires human operators. The chronic labor shortage in Japan means their clients cannot utilize more equipment, even if they want to buy it. This creates a bottleneck that decouples Aichi’s sales from the broader demand surge in electrical infrastructure.

The Long-Term Thesis: Why I’m Still Watching

If you can look past the short-term index volatility, several structural catalysts remain in play:

I detailed my long term thesis on Aichi in my note to the clients.

If you’d prefer to start by sampling my work, I’d be happy to send it straight to your inbox at no cost. I’m confident that once you experience the depth, clarity, and practical value of my research, you’ll see why even clients with established Japan research teams find my perspective uniquely useful.

#Aichicorp #Itochu #Electricconstruction #denko #Japanesestocks #Japanesevaluestocks #topix