Macquarie Marquee Ideas:Japan Update

Sumitomo Heavy Industries (6302 JP, OP) – SHI has various cyclicalbusiness lines such as speed reducers, plastic injection molding machines,and construction machinery (57% of FY3/16 sales) which should benefit fromrecovery in global economic activity. Kunio Sakaida initiates with Outperformrating and ￥950 price target. He forecasts FY3/18 OP at ￥52.8bn, 12% aboveconsensus.

Nissan (7201 JP, OP) – We believe investors have a number of mistakenimpressions about the company that should be neutralised with a solid 2Hperformance. Further, we believe the new 3-year plan due out in the springwill increase positive sentiment about the growth prospects of Nissan.

Minebea (6479 JP, OP) – We believe that Mitsumi consolidation by Minebeabeginning FY3/18 should be accretive to OP (we estimate ￥2.4bn OPcontribution in FY3/18 and ￥5.3bn in FY3/19) on cost synergy and closure ofunprofitable businesses. The stock could be re-rated back to 15-20x PER if itis able to grow profits from the electronics device segment.