Mitsubishi Heavy Industries, Ltd.
7011.THIGHScore: 61.4Core · Weight: 20%· Data as of 2026-05-24
Investment Thesis
Japan's #1 defense contractor — prime on GCAP 6th-gen fighter, Type 12 missile mass production, Taigei submarines, Mogami frigates. FY2025 full-year results (announced May 12, 2026): Revenue ¥4,974.1B (+14.1%), NI ¥332.1B (+35.3%) — all records. ADS segment hit ¥1,144.5B (>¥1T milestone confirmed, +38% YoY). Order intake ¥7,653.6B (+20%). Australia Mogami contract formally signed April 18, 2026 (A$10B, 3 frigates — Japan's largest ever defense export). Arms export liberalization enacted April 21, 2026 — first Philippines destroyer sale framework agreed May 7. FY2026 guidance: Revenue ¥5.4T, Business Profit ¥540B (+25%). Stock fell -7.07% on earnings day (sell-the-news) despite record results — current ¥4,080 vs analyst PT ¥5,348-5,507.
Risk
1) PE 40.1x still reflects defense premium — compression risk if geopolitical tensions ease or defense budget growth slows. 2) NEW: China export controls — 5 MHI subsidiaries on China's dual-use export control list (Feb 24, 2026). Input procurement risk for rare earths, tungsten. Controls still in force. 3) GCAP is a decade-long program with execution risk across 3 countries. 4) D/E 21% (interest-bearing basis; 165% on total liabilities) — the difference reflects financial debt only vs. gross balance sheet. 5) Defense ADS (23% of revenue) vs Energy Systems (42%) — still a conglomerate, not a pure defense play. 6) FCF declined ¥585B → ¥300B — prior figure likely included advance payments from Mogami contracts.
Monitoring Trigger
✓ ADS ¥1T: CONFIRMED (¥1,144.5B). ✓ Australia Mogami contract: SIGNED April 18, 2026. ✓ Arms export enacted. NEW: Watch first named arms export contract under new rules (Q2-Q3 2026). Watch China sanctions resolution — if escalated, review supply chain for rare earth/tungsten exposure. If forward PE drops below 30x on earnings growth, ADD. Dividend ¥29/share guided FY2026 (+16% YoY).
Key Dates
Key Metrics
Business Segments
| Segment | Revenue | Share | Description |
|---|---|---|---|
| Energy Systems | ¥871B (1H) | 41% | Gas turbines (GTCC), nuclear power — largest segment |
| Aircraft, Defense & Space | ¥1,144.5B (FY2025 full year) | 23% | GCAP fighter, Type 12 missiles, Mogami frigates, Taigei submarines, space launch. FY2026 guidance ¥1,250B. |
| Plants & Infrastructure | ¥415.9B (1H) | 20% | Chemical plants, transportation, environmental systems |
| Logistics, Thermal & Drive | ¥282.4B (1H) | 13% | Forklifts, turbochargers, engines |
Supply Chain Evidence
| Evidence | Customer | Product | Detail |
|---|---|---|---|
| confirmed | JMSDF | Mogami-class frigates (12 ships completed Dec 2025) | Final FFM launched Dec 2025. ¥58.3B per ship contract. |
| confirmed | Royal Australian Navy | Improved Mogami frigates (initial 3 ships, SEA 3000 Phase 1) | FORMAL CONTRACT SIGNED April 18, 2026 — A$10B for 3 GPF (General Purpose Frigates). Japan's largest-ever defense export. Up to 11 ships in full program at A$20B. First ship delivery 2029. MHI Nagasaki yard. Source: MHI press release mhi.com/news/260418.html + Australian MoD. |
| confirmed | Philippine Navy (framework) | Used JMSDF destroyers (first arms sale under April 2026 rules) | Japan-Philippines framework agreed May 7, 2026 for transfer of used JMSDF destroyers — first lethal weapons sale under the April 21, 2026 Three Principles revision. MHI not named as direct contractor in this deal but opens Japan-Philippines naval cooperation precedent. |
| confirmed | JASDF / ATLA | Type 12 upgraded surface-to-ship missile | ¥25B mass production contract. Service entry FY2027. |
| confirmed | JMSDF | Submarine-launched cruise missile | ¥2.9B initial contract for torpedo tube-launched variant. Operational by 2028. |
| confirmed | GCAP JV (UK/Italy) | 6th-gen fighter aircraft (prime contractor Japan) | MHI is Japan's prime. IHI handles engine (XF9), Mitsubishi Electric handles electronics. First flight 2027, service 2035. |
| confirmed | JMSDF | Taigei-class submarines | MHI and KHI alternate submarine production. 5th Taigei commissioned March 2026. |