Goldman Sachs JAPAN MACHINERY: CONSTRUCTION — Preferences based on simple risk-reward amid an unclear cycle; stay Buy on Kubota
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Key Views
North American construction investment is flat at historically high levels, though declining manufacturing investment poses a mild downside risk. Recent gains in shipments and production stem mainly from inventory restocking rather than a full end-demand recovery. Dealer inventories have normalized after 2024–2025 adjustments, and robust wholesale demand may persist for several quarters.
In compact construction equipment, mini excavator inventories are excessive—hurt most by slowing housing demand—while loader trends remain stable but with already-healthy stock. North American tractor retail demand undershot expectations, yet after sufficient inventory adjustment, growth of roughly 5% is expected in 2027. For mining machinery, copper prices are strong, coking coal is elevated, and iron ore is soft; major miners' capex is likely peaking in 2025 before decelerating. Indonesian policy shifts add uncertainty.
Recommended Securities
- Kubota (6326.T): Buy, target price JPY 3,300 (current JPY 2,724.5, +21.1% upside).
- Komatsu (6301.T): Neutral, target price JPY 6,300 (current JPY 6,395, –1.5% downside).
Key exhibits
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