My 5/3/26 HSK note (attached), which highlighted the company as an alternative way to gain exposure to the same structural tailwinds benefiting MHI, turned out to be poorly timed. This was especially disappointing given my argument that MHI’s valuation metrics at the time—a P/B of 5.8x, FY3/27 P/E of roughly 53x, and EV/EBITDA of 17.6x—were not as stretched as they appeared when assessed against its long-term growth prospects.

The core thesis was that Japan’s rearmament is a multi-year trend. HSK appeared to offer a less-discovered way to participate in that theme through its deep capital and business relationship with MHI.

MHI’s share price peaked at ¥5,208 on 3/2/26, but has since pulled back 30% to a YTD low of ¥3,616 on 6/2/26, despite the company reporting record highs across orders, revenue, profit, and free cash flow for FY3/26. The order backlog increased by ¥3,001 bn to ¥13,238 bn—equivalent to roughly 2.5 years of sales.

The key concern, aside from Goldman’s removal of MHI from its conviction list, appears to be the expected YoY decline in order intake for FY3/27. Management is guiding to an 11.1% drop in company‑wide orders, with Defense & Aerospace down 14.5%. This would represent the second consecutive year of declining defense orders, reinforcing investor worries that order intake may have already peaked.

Do you think order intake has already peaked? I’ve laid out my view in my client note. If you’d prefer to start by sampling my work, I’m happy to send it straight to your inbox at no cost. Once you see the depth, clarity, and practical value of my research, you’ll understand why even clients with established Japan research teams find my perspective uniquely useful.

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