Morgan Stanley: Japanese Infrastructure Stocks — 2026 Investment Strategy: Middle East Instability Drives Interest in Grid-Scale Battery Storage
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Morgan Stanley has published its 2026 investment strategy for Japanese small- and mid-cap infrastructure stocks, highlighting that Middle East instability and elevated energy prices are accelerating interest in grid-scale battery energy storage systems (BESS). The report classifies social infrastructure manufacturers into two categories: power and electricity infrastructure, including West Holdings, eREX, and Daihen; and broader social infrastructure, such as rivers, coastlines, and railways, represented by Giken.
The firm covers four primary companies. West Holdings (1407.T, Overweight) is shifting resources from solar generation to battery storage, targeting profit contributions from fiscal 2026 onward. The target price was lowered from ¥2,600 to ¥2,500. Daihen (6622.T, Overweight, PT ¥15,000) aims to capture growing demand for grid-scale batteries and power equipment. eREX (9517.T, Equal-weight) secures profits in domestic power retail while expanding its storage battery business; its target price was raised to ¥1,000. Giken (6289.T, Equal-weight) is experiencing a gradual earnings recovery, with deeper overseas market penetration expected to drive accelerated growth. Its target price was increased to ¥1,900.
As renewable energy expansion and data center growth complicate grid supply-demand management, demand for batteries that enhance supply stability is expected to rise significantly. Investors are increasingly focused on upcoming earnings disclosures to assess whether profitability milestones align with stated mid-term plans.