Industrials

Report by Yuka Marosek

Japan’s water shortage is increasingly structural, driving policy response and accelerating desalination investment, reinforcing a multi-year demand tailwind for Torishima Pump given its dominant global positioning with 40% market share. Orders and sales are at record highs, while order backlog exceeded ¥100bn for the first time, but FY3/25 exposed execution limits: OP fell to ¥5.4bn on delays, margin pressure and capacity constraints. These “growing pains” stem from rapid scaling, forcing outsourcing and inefficiencies. Encouragingly, H2 recovery and reforms (capacity expansion, front-loading, AI adoption) point to gradual margin normalisation. The medium-term pivot towards higher-margin service revenue and global expansion supports the path to ~10% operating margins, while valuation (~14x PER) remains undemanding vs. peers.

Report by Churchill Research

Since inception, Mike Churchill’s Japan II portfolio has outperformed the Nikkei by 23.6 percentage points - the portfolio was started in Nov 2020 with the idea of screening the entire Japanese equity universe once a year. Mike picks 100-or-so names for the first cut, then narrows that down to the 30 most attractive. Every year the portfolio is completely sold off and re-stocked with those 30 best ideas. Top performers last year included Nippon Steel Trading, Nakayama Steel and Torishima Pump Mfg. One stock he is particularly keen on is Shinnihon Corp, describing the homebuilder as “so insanely cheap it's ridiculous”. TP ¥1,235 (70% upside).