Goldman Sachs Japan Clean Energy: Nuclear: Japan-US Strategic Investments: Report Suggests Phase 3 May Focus on SMRs; Reiterating Our Buy on JSW (5631.T)
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Kyodo News reported on September 12 (JST) that next-generation small modular reactors (SMRs) are the leading candidate for phase three of the $550 billion Japan-US investment framework agreed under the July 2025 tariff accord, with large nuclear reactors also reportedly under consideration; cautious views are said to be emerging among the Japanese nuclear equipment makers expected to participate. SMRs were already included in phase two, announced at the March 2026 leaders' summit, when both governments assumed roughly ten units, with further scale-up targeted from phase three onward. Although SMRs are compact, Goldman notes that primary-system nuclear components are generally similar in size to conventional reactors, and Japan Steel Works (5631.T) holds a high global share in large forged nuclear components. Goldman therefore reiterates Buy with a 12-month target of ¥11,500 versus the last close of ¥6,966, based on a 10% premium to the 14x subsector-average EV/EBITDA applied to FY3/30E estimates and discounted back at a 10% cost of capital to FY3/28E. Phase-three investment size remains unknown; Goldman's March report estimated phases one and two could lift JSW operating profit by several percentage points. IHI (7013.T) has invested in NuScale, with component-supply cooperation possible. Key risks: production delays, higher-than-assumed fixed costs from capacity expansion, and weaker industrial machinery profits.