Goldman Sachs: Japan Steel Works (5631.T) Benefits from Tight Gas Turbine Supply-Demand and Intact Nuclear Demand; New TP of ¥11,500; Buy
Summaries are public. PDF access requires an active membership; all members have the same access. Sign in
Goldman Sachs maintains its Buy rating on Japan Steel Works (5631.T) and raises the 12-month target price from 10,500 yen to 11,500 yen. This revision is primarily driven by a tightening supply-demand balance in the global gas turbine market and sustained momentum in nuclear power demand. The target price is based on an unchanged valuation multiple of approximately 20 times the projected 2027 fiscal year price-to-earnings ratio.
The report highlights that Japan Steel Works is uniquely positioned as a critical supplier of high-end castings and forgings for gas turbines, positioning the company to benefit directly from rising order volumes. Concurrently, the firm's nuclear power segment continues to provide stable revenue visibility, supported by long-term contracts as baseload power demand remains intact. Following a comprehensive review of cost assumptions and more favorable industry dynamics, Goldman Sachs has revised its operating profit forecasts upward. The new projections are 43 billion yen for fiscal year 2026, 50 billion yen for 2027, and 55 billion yen for 2028.
These upward revisions reflect anticipated improvements in operational efficiency and better raw material cost control. Goldman Sachs believes the current market valuation does not fully reflect the company's earnings growth potential. Key downside risks to this outlook include a potential slowdown in gas turbine demand, unexpected delays in nuclear power projects, cost overruns, and intensifying competition within the industry.
Key exhibits
Exhibit 1
Exhibit 2
Exhibit 3
Exhibit 4
Exhibit 5
Exhibit 6
Exhibit 7
