ENVALITH
川崎重工業株式会社 logo

Kawasaki Heavy Industries, Ltd.

7012・Prime Market・Transportation Equipment

Official website
川崎重工業株式会社 logo
Kawasaki Heavy Industries, Ltd.7012

Business

Kawasaki Heavy Industries, founded in 1878, is a comprehensive heavy industry manufacturer operating five business segments: Aerospace Systems, Rolling Stock, Energy Solution & Marine Engineering, Precision Machinery & Robot, and Powersports & Engine. With 136 consolidated subsidiaries and 31 affiliated companies, it supplies a wide range of products to global markets, from Defense Ministry aircraft and submarines to Commercial Aero Engine Shared Production Parts, Railway Rolling Stock, Industrial Robots, and Motorcycles/four-wheelers. In FY2025, consolidated revenue reached ¥2,311,267 million, with the Defense Ministry as a major customer accounting for 18.6% of sales. Under "Group Vision 2030," the company is also advancing the early commercialization of new businesses such as hydrogen energy and medical robots.

Business Model

The order-based businesses (Aerospace Systems, Rolling Stock, Energy Solution & Marine Engineering) build up long-term order backlogs, securing revenue visibility while achieving high business profit margins. The volume-production business (Powersports & Engine) pursues economies of scale through forecast-based production leveraging global brands. Precision Machinery & Robot sits between the two, capturing manufacturing capital expenditure demand through Hydraulic Equipment and Industrial Robots. The company invests ¥56.8 billion in R&D expenses and ¥143.3 billion in capital expenditure, positioning technological capability as a source of competitive advantage.

Company Strengths

As of the end of FY2025, the order backlog for Aerospace Systems reached ¥1,536,199 million (+18.0% year on year), achieving a business profit margin of 10.2%. Sales to the Ministry of Defense amounted to ¥429,769 million (18.6% of the total), forming a stable revenue base. With increased production capacity and supply chain restructuring underway, medium- to long-term revenue visibility remains high.

Energy Solution & Marine Engineering achieved a business profit margin of 12.7% (+1.6 percentage points year on year), the highest level among all segments. Order backlog rose to ¥943,569 million (+14.3% year on year), and increased investment gains from equity-method affiliates (including a Chinese joint venture shipbuilding company) also contributed to earnings.

In FY2025, the company achieved record-high orders, sales, and profit simultaneously, along with profitability across all business segments. While order-driven businesses such as Aerospace Systems, Energy, and Precision Machinery & Robot secure high profit margins, Powersports & Engine provides mass-production scale, creating a portfolio structure in which fluctuations in specific businesses can be absorbed by others.

ENVALITH's Perspective

In FY2026 (ending March 2026), Powersports & Engine was the largest segment by revenue at ¥682,812 million, but business profit remained low at ¥22,750 million (business profit margin of 3.3%), a sharp decline of ¥25.1 billion year-on-year. This resulted from a combination of rising U.S. tariff costs, deteriorating profitability due to intensifying competition in the North American powersports market, and increased fixed costs associated with capacity expansion investments. The FY2027 (ending March 2027) outlook also projects business profit remaining at a low level of ¥30,000 million, making this the largest risk factor in the scenario for improving the company-wide business profit margin from 6.3% to over 10%. Downside risk remains depending on the direction of U.S. tariff policy.

Regarding the misconduct cases in the submarine repair business and marine engine business, it was announced that the investigation by the Special Investigation Committee was completed in December 2025. Recurrence prevention measures are being promoted under the leadership of the Special Compliance Promotion Committee, chaired by the President. However, the repeated discovery of compliance issues carries an inherent risk of impacting orders from the Ministry of Defense and other public agencies, requiring continuous monitoring of the effectiveness of trust recovery and future order trends. Orders received for Aerospace Systems in FY2026 (ending March 2026) decreased by ¥71.9 billion year-on-year to ¥810,900 million, and it is important to distinguish this from the rebound decline following large-scale orders in the prior period.

The consolidated earnings forecast for FY2027 (ending March 2027) is revenue of ¥2,560,000 million (+10.8% year-on-year), business profit of ¥170,000 million (+17.2%), and net income attributable to owners of the parent of ¥110,000 million (+1.7%). The plan is driven by revenue growth across the Aerospace Systems, Precision Machinery & Robot, and Powersports & Engine segments. On the other hand, consolidated orders received are projected at ¥2,540,000 million, a decrease of ¥199.1 billion year-on-year, mainly due to the rebound decline from large orders in Aerospace Systems (−¥210.9 billion) and Rolling Stock (−¥189.1 billion). The foreign exchange assumptions are ¥150 to the dollar and ¥180 to the euro, and attention should be paid to downside risk should the yen appreciate further. After-tax ROIC is projected at 8.6% and ROE at 12.0%.

Growth Strategy

Aiming for a group-wide business profit margin exceeding 10% by 2030 through three pillars: expansion of defense and aerospace, monetization of Precision Machinery & Robot, and rebuilding of compliance systems

Continuing to expand orders and sales related to aircraft, engines, and naval vessels for the Ministry of Defense. Also promoting the establishment of an increased production system for Commercial Aero Engine Shared Production Parts. The FY2027 (ending March 2027) outlook plans revenue of ¥720,000 million and business profit of ¥72,000 million for Aerospace Systems, positioning it as the main driver of company-wide margin improvement.

In addition to increased revenue in the shipbuilding/marine and plant fields, an increase in equity-method investment profit contributed to achieving business profit of ¥55,016 million in FY2026 (ending March 2026) (up ¥10.7 billion year on year). Business profit of ¥69,000 million is planned for FY2027 (ending March 2027), with profitability improvement expected to continue. Portfolio optimization is also being carried out through the transfer of Earthtechnica shares (60% transferred in April 2026).

Capturing growing demand for robots for semiconductor manufacturing equipment and Hydraulic Equipment for Chinese construction machinery, business profit of ¥14,391 million was achieved in FY2026 (ending March 2026) (up ¥7.3 billion year on year). Business profit of ¥21,000 million is planned for FY2027 (ending March 2027). Cultivation of new businesses such as the Medical Robot (hinotori™) is also continuing.

Commercial demonstration of the liquefied hydrogen supply chain has begun, and together with the CO2 separation, capture, and utilization business, early commercialization is being targeted. This is a core initiative within the focus field of "Energy & Environmental Solutions" under Group Vision 2030. The adjustment amount related to new business investment (head office projects) was ¥-12,223 million in FY2026 (ending March 2026), and is planned to expand to ¥-20,000 million in the FY2027 (ending March 2027) outlook.

Following the misconduct case in the submarine repair and marine engine business, recurrence prevention measures are being promoted under the leadership of the Special Compliance Promotion Committee chaired by the President. The investigation by the Special Investigation Committee was completed in December 2025. Highly effective measures aimed at strengthening the compliance and governance system across the entire group continue to be implemented.

Last updated: July 19, 2026