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雷达卡
Rising visibility and progress in commodity markets
and share price corrections boost appeal: We raise
the industry to Attractive. Commodity markets have
picked up in recent months but trading co’s have
performed about even with TOPIX. Yet we see higher
investment appeal due to: (1) further upward revisions to
the outlook for commodity markets spurred by demand
recovery; (2) related improvement in earnings visibility
from F3/11; (3) expectations for 1H overshoot (tba at
end-Oct / early Nov); (4) progress in short-term
commodity price correction, formerly an immediate risk.
Mitsui & Co., Mitsubishi Corp join Marubeni at OW:
We remain upbeat on Marubeni but also raise Mitsui &
Co. and Mitsubishi Corp to OW for benefits of price
growth in areas like steel raw materials and energy.
Valuation and earnings gains to drive stocks:
Inventory has corrected and resource prices are lifting
off the bottom and into recovery. But lingering concerns
about demand growth and visibility on market prices
from F3/11 have hampered discounting in share prices.
Valuations are around the bottom of usual cyclical
norms (F3/11e P/E 6-9x, P/B 0.7-1.0x), and along with
earnings growth, we expect expansion here as the
market factors for brighter economic sentiment and
rising resource prices to propel share prices higher.
Upcoming events: Potential catalysts for share price
gains from here are (1) expectations of F3/10 guidance
upward revisions, (2) developments in F3/11 steel raw
material price talks in 2H, and (3) rising commodity
prices and expectations of demand growth with
inventory build-up after the China National Day holiday,
and ahead of Christmas/New Year, and Lunar New
Year.
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