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Morgan Stanley on Japan IT: Solid Demand, Sector Underperformance — NSSOL UW ¥3,500

Posted on by Eben@CANSLIM Research
Eben@CANSLIM Research's avatarEben@CANSLIM Research

Morgan Stanley MUFG Securities rates Japan’s IT & software sector In-Line, arguing that demand remains solid but the sector has underperformed, and that share prices should recover in line with profit growth. In a coverage summary dated 18 September 2026, the broker keeps NSSOL (2327) at Underweight with a ¥3,500 price target, while the “Big 3” — NRI (4307), NEC (6701) and Fujitsu (6702) — all carry Outperform ratings. The report frames generative AI as the central swing factor for both margins and revenue models across the coverage universe.

Key Takeaways

  • Morgan Stanley MUFG Securities rates NSSOL (2327) Underweight with a ¥3,500 price target, implying 11.7% upside from the reference price, with consensus 2-year forward P/E of 16.4x and EV/EBITDA of 7.9x.
  • NRI (4307), NEC (6701) and Fujitsu (6702) are all rated Outperform, with price targets of ¥6,000, ¥6,000 and ¥5,000 respectively — upside of 15.3%, 23.7% and 24.2%.
  • TISI (3626) and SHIFT (3697) are rated Equal-weight with targets of ¥4,000 and ¥800; TISI sits 2.1% below its reference price while SHIFT is 9.6% below.
  • Trend Micro (4704) is the only Underweight outside NSSOL, at a ¥5,000 target and 17.6% below the reference price, with consensus 2-year forward P/E of 18.3x.
  • SHIFT (3697) carries the highest forecast EPS growth in the table at 43% for the next year, alongside 21% revenue growth, yet remains Equal-weight — the report notes its high-growth premium is declining.

Lead Analysis: What the Morgan Stanley MUFG Report Says

In a report titled “IT & Software: Investment Ideas for Late 2026—2027: Solid Demand but Sector Underperformance; Expect Share Price Recovery in Line With Profit Growth,” Morgan Stanley MUFG Securities analysts Tetsuro Tsusaka, Luyuan Yang and Keiji Nishimura set out an In-Line industry view for Japanese IT and software. The central argument is that underlying demand is firm, but the sector has lagged, and that equity performance should re-couple with earnings growth from here.

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