Japan's METI Battery and Power Industry Strategy Benefits GS Yuasa Corporation

Overview

Morgan Stanley released a report on the impact of Japan's METI newly announced battery and power industry strategy on GS Yuasa Corporation (stock code: 6674.T). The report notes that METI revised its previous battery industry strategy, expanding it into a broader battery and power industry strategy aimed at establishing manufacturing bases and enhancing the competitiveness of the entire battery-centric power system. GS Yuasa continues to focus on its core mobility business in its medium-to-long-term plan while expanding into social infrastructure as a growth area. Morgan Stanley believes the strategy aligns with GS Yuasa's medium-to-long-term strategy and is expected to positively impact the company's stock price.

Core views

Japan's METI released a new battery and power industry strategy on June 2, aimed at establishing manufacturing bases and enhancing the competitiveness of the entire battery-centric power system. The previous battery industry strategy primarily focused on lithium-ion battery production, but with delays in BEV demand expansion and emerging demand from AI data centers, medical, and disaster prevention applications, the scope of the battery and power industry strategy has been expanded. In its medium-to-long-term plan announced on May 13, GS Yuasa continues to focus on its core mobility business (lead-acid and lithium-ion batteries) while enhancing competitiveness and supply capacity in the social infrastructure sector. The company has identified AIDC (high-reliability power for data centers) and ESS (renewable energy integration and grid stability) as new markets. Morgan Stanley believes METI's new strategy aligns with GS Yuasa's medium-to-long-term strategy and is expected to positively impact the company's stock price. Morgan Stanley's valuation of GS Yuasa is based on the SOTP method, valuing different business lines separately: automotive lead-acid batteries at 12x P/E, industrial batteries and power at 22.5x P/E, automotive lithium batteries at 20x P/E, and specialty batteries at 25x P/E. The company's current target P/E is 18x, higher than the industry benchmark of 12x, reflecting market recognition of its future growth potential. Additionally, ESS (energy storage systems) is seen as a mid-term growth driver, although the BEV (battery electric vehicle) market remains uncertain, HEV (hybrid electric vehicle) orders are strong, and production line flexibility supports ESS development. However, the report also highlights potential risks, including intensified price competition from low-cost overseas battery products, limited scale of data center UPS business, and the impact of yen depreciation on earnings growth.

Analysis framework

Morgan Stanley analyzed the impact of METI's new policy and GS Yuasa's medium-to-long-term strategy on the company. The firm used SOTP (sum-of-the-parts) valuation to assess GS Yuasa, combining P/E multiples for different business lines to calculate the target price. Additionally, the firm considered changes in market demand, such as renewable energy expansion, growth in HEV orders, and production line flexibility, as future growth drivers. Potential risks, such as intensified competition and currency fluctuations, were also identified.

Methodology notes

• Valuation MethodSOTP Valuation

  SOTP (sum-of-the-parts) is a valuation method based on different business segments or divisions, suitable for multi-business companies.

  Morgan Stanley used SOTP to value GS Yuasa, valuing different business lines (e.g., automotive lead-acid batteries, industrial batteries, lithium batteries) separately and summing them for an overall valuation. This method more accurately reflects the actual value of each business.

• Industry Analysis FrameworkSupply-demand framework

  The supply-demand framework is an important method for analyzing industry trends and company competitiveness by assessing market demand and supply conditions.

  Morgan Stanley analyzed METI's new policy and changes in market demand (e.g., renewable energy expansion, growth in HEV orders) to assess GS Yuasa's growth potential in the coming years.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• GS Yuasa Corporation (6674.T)

  Japan's METI new battery and power industry strategy aligns with the company's medium-to-long-term strategy and is expected to positively impact its stock price.

  Strengths

  Strong core mobility business with growth potential in social infrastructure; ESS seen as a mid-term growth driver.

  Weaknesses

  Facing competitive pressure from low-cost overseas battery products; limited scale of data center UPS business.

  Comparison

  Compared to other auto parts companies, GS Yuasa has stronger technological expertise and market share in the battery and power sectors.

  Risks

  Intensified price competition, limited impact from currency fluctuations, limited scale of data center UPS business.

Key data

• Target P/E18.0xHigher than the industry benchmark of 12.0x, reflecting market recognition of the company's future growth potential.
• Current Price¥6,409Closing price as of June 1, 2026.
• Target Price¥8,250Calculated using the SOTP valuation method, with an expected upside of approximately 25.7%.
• Market Capitalization¥642.9 billionThe company's current market cap.
• Average Daily Trading Value¥3.4 billionThe company's average daily trading volume.

Impact & implications

Japan's METI new battery and power industry strategy will drive GS Yuasa's growth in battery and power-related sectors. Morgan Stanley believes the strategy aligns with the company's medium-to-long-term plan and is expected to positively impact its stock price. Additionally, ESS (energy storage systems) is seen as a mid-term growth driver, although the BEV market remains uncertain, growth in HEV orders and production line flexibility will support the company's development. However, potential risks include intensified price competition from low-cost overseas battery products, limited scale of data center UPS business, and currency fluctuations.

Risks

• Intensified price competition from low-cost overseas battery products
• Limited scale of data center UPS business
• Yen depreciation limiting earnings growth

What to watch

• Further implementation of Japan's METI policy
• Changes in BEV market demand
• Continued growth in HEV orders
• Development of ESS technology