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Hitachi(6501)| Japan Kazuo Yoshikawa, CFA Investor Feedback On OurInitiation Report We summarize investor feedback on our view of Hitachi. Daisuke HoriuchiResearch AssociateDaisuke.Horiuchi@morganstanleymufg.com+81 3 6836-5428 Key Takeaways Many investors positively assess Hitachi’s medium- to long-term growthprospects and quality, and there was pushback against our EW rating. Hitachi (6501.T, 6501 JP) Stock RatingEqual-weightIndustry ViewNo RatingPrice target¥5,200Up/downside to price target (%)8Shr price, close (Apr 10, 2026)¥4,810Mkt cap, curr, basic (bn)¥21,977.0Div yld (03/26e) (%)1.1 In particular, many investors expressed a bullish view on revenue growth andmargin improvement in the Energy sector. Meanwhile, views on the Digital Systems & Services sector were mixed. On April 1, we initiated coverage of Hitachi with an EW rating: Consensus alreadyexpects robust growth in the Power Grids and domestic IT services business. Whilefurther multiple expansion would require growth acceleration driven by digitaltechnologies, we believe the contribution from Physical AI / ”HMAX” to groupearnings will remain limited over the next several years. Market expectations arealready elevated, and we view risk/reward as not particularly favorable (Hitachi:Initiate Coverage at EW: Can Lumada 3.0 / HMAX Accelerate Growth? (1 Apr 2026)). Investor feedback on our view: Many investors highly value Hitachi’s medium- tolong-term growth prospects—particularly in the Energy sector—as well as thecompany’s overall quality, and there was significant pushback against our EW rating. Some investors, who appear to have a relatively shorter time horizon, alsocommented that since February the stock has underperformed the market,suggesting that the risk-reward profile has in fact improved. One investor noted thatwhile businesses such as Digital Systems & Services (DSS) and GlobalLogic may faceAI-related disruption risks, outlooks for Hitachi’s power grid, railway, and semicapital equipment businesses are strong. As a result, the investor was short stockswith high exposure to IT services and long Hitachi. Energy sector: We forecast Hitachi Energy’s FY3/25–3/28 revenue CAGR at 17%,above the company’s target range of 13–15%. However, we expect Hitachi Energy’space of revenue growth and margin improvement to trail that of Siemens Energy’sGrid Technology business (covered by our European Capital Goods analyst MaxYates) and GE Vernova’s Electrification business (covered by our North AmericanPower, Utilities & Cleantech analyst David Arcaro) (see Exhibit 1). Morgan Stanley does and seeks to do business withcompanies covered in Morgan Stanley Research. As a result,investors should be aware that the firm may have a conflict ofinterest that could affect the objectivity of Morgan StanleyResearch. Investors should consider Morgan StanleyResearch as only a single factor in making their investmentdecision. Several investors argued that, given Hitachi Energy’s geographic mix and thepotential for expansion in its service businesses, the risk of its growthunderperforming peers is limited, and that we may be underestimating HitachiEnergy’s growth potential. For analyst certification and other important disclosures,refer to the Disclosure Section, located at the end of thisreport. += Analysts employed by non-U.S. affiliates are not registeredwith FINRA, may not be associated persons of the memberand may not be subject to FINRA restrictions oncommunications with a subject company, public appearancesand trading securities held by a research analyst account. GlobalLogic:We forecast GlobalLogic’s FY3/25-28 revenue CAGR (US$ basis) at 7%, wellbelow the company’s 20% target. We remain cautious, as we see a continued trend ofcorporate IT spending shifting toward AI-related areas, which could constrain demand fortraditional IT services. We also expect AI-driven structural pricing pressure to persist, andthus forecast GlobalLogic’s stand-alone adjusted operating margin to remain broadly flatfrom FY3/26. However, GlobalLogic supports the strengthening and rollout of HMAXwithin the Hitachi Group, with the contribution recognized as revenues in other sectors(Exhibit 2). We view GlobalLogic’s contribution to the group’s digital and Physical AIinitiatives as significant, despite its more modest standalone growth. There was limited pushback against our view. Some investors asked how we assess therisk of impairment of goodwill and intangible assets related to the GlobalLogic acquisition.Meanwhile, other investors commented that the detailed explanation of the “execution ofDSS growth strategy” in the FY3/26 Q3 earnings presentation (Exhibit 3) demonstratesHitachi's strong conviction in the growth of the DSS business. They also noted thatfrontend and IT services order intake is solid, and that revenue growth could exceedconsensus expectations. Cash flow outlook: We forecast core FCF for FY3/26 at approximately ¥1.0 trillion(defined as recurring cash flow