MHI Targets Robust Near-Term Growth, We Are Less Optimistic but FVE Is Raised

Mitsubishi Heavy Industries is one of the world’s leading industrial engineering groups, with expertise that spans from power turbines to submarines and particle accelerators, but its return on invested capital and operating margin lag those of peers such as General Electric and Siemens. Part of this is due to relatively high costs of production at home in Japan, a lack of scale for its defense products, and some projects--namely its regional jets and cruise ships--losing money. MHI’s management is focusing on consolidation and select investment to boost profitability.