Goldman Sachs maintains a bullish view on Japan's semiconductor utilities subsector, with core beneficiaries of medium- to long-term semiconductor capital spending

Overview

This report is a Goldman Sachs industry update on Japanese semiconductor utilities-related companies, covering Japan Material, Nomura Micro Science, Organo, and Kurita Water Industries. Goldman Sachs adjusted earnings forecasts based on the latest capital spending plans of major semiconductor companies and maintained a bullish stance on the subsector. The core logic is that medium- to long-term semiconductor investment remains strong, and the relevant companies are well positioned to benefit in ultrapure water facilities, semiconductor projects, and electronics businesses.

Core views

Goldman Sachs believes valuations in this subsector remain at healthy levels and that it will continue to benefit from strong semiconductor investment over the medium to long term. At the stock level, although Japan Material's FY3/28 operating profit forecast was raised by 17%, much of its growth expectation has already been reflected by the market, so the rating remains Neutral; Nomura Micro Science saw a significant upward revision to earnings forecasts due to higher confidence in a large U.S. project, and its valuation remains toward the low end of the normal range, so Buy is maintained; Organo maintains a high-growth outlook over the coming years due to global TSMC ultrapure water facility demand, and despite slight cuts to earnings and target price, Buy is maintained; Kurita Water Industries is expected to win multiple large semiconductor customer projects in FY3/27, and there are no clear signs of weakening future profit growth, so Buy is maintained.

Analysis framework

The report uses a combination of top-down judgment on the semiconductor capital spending cycle and bottom-up updates to company earnings forecasts, focusing on project timelines, order confirmation, margins, customer mix in capital spending, valuation multiples, and target price methodology. Target prices mainly use relative industry EV/EBITDA multiples, with different relative premiums or discounts assigned to different companies.

Methodology notes

• Valuation methodsEV/EBITDA relative valuation

  Using the industry average EV/EBITDA multiple as a benchmark and assigning a premium based on the company's position in the cycle, growth quality, or historical premium level.

  Japan Material uses FY3/27E EBITDA at the industry average EV/EBITDA of 10X plus a 20% premium; Nomura Micro Science uses average FY3/27E-FY3/28E EBITDA at 10X plus a 40% premium; Organo uses 10X plus a 60% premium and discounts FY3/29 valuation back to FY3/27 at a 6.5% WACC; Kurita Water Industries applies 10X plus a 10% premium to FY3/27E EBITDA.

• factor_analysisGS Factor Profile

  Goldman Sachs evaluates stocks' positioning versus the market and industry peers based on growth, financial returns, valuation multiples, and composite metrics.

  Growth is based on forward sales, EBITDA, and EPS growth; financial returns are based on ROE, ROCE, and CROCI; valuation multiples are based on P/E, P/B, dividend-related indicators, EV/EBITDA, EV/FCF, etc.; composite metrics are the average of growth, financial returns, and cheap valuation direction.

• risk_methodologyProject progress and capital spending sensitivity analysis

  Assessing risks to earnings forecasts through semiconductor customer capital spending, project order timing, construction delays, and margin changes.

  The report repeatedly emphasizes factors such as acceleration or delay of initial projects, timing of large North American project orders, TSMC capital spending, material and labor costs, supply shortages, and longer construction cycles caused by labor regulations.

Asset mapping & comparison

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

• Japan Material (6055.T)

  Covered company; a semiconductor utilities-related name, highly affected by Kioxia capital spending and the memory cycle.

  Strengths

  A strong memory market is driving future growth expectations; Kioxia has contributed 35%-52% of its sales over the past five years, and FY3/28 operating profit is expected to grow more than 40% year over year.

  Weaknesses

  It has already seen a significant rerating since the start of the year, project timelines are still changing, and the scale of new projects will affect margins.

  Comparison

  Compared with other covered companies, Goldman Sachs believes Japan Material's growth expectations are more fully reflected in valuation, and therefore maintains Neutral rather than Buy.

  Risks

  Acceleration or delay of initial projects; margin improvement or deterioration due to changes in material and labor costs; uncertainty around overseas initial project expansion.

• Nomura Micro Science (6254.T)

  Covered company; driven by large North American projects and ultrapure water-related demand.

  Strengths

  FY3/27 operating profit forecast raised by 33%, with contributions from large U.S. projects now included in guidance; on FY3/27E and FY3/28E P/E, the share price is toward the low end of the normal range.

  Weaknesses

  The growth story depends on the timing of large project orders, and delays in confirmation would affect earnings realization.

  Comparison

  Among the covered companies, it has the most significant upward earnings revision and is one of the core names supporting the maintained Buy rating.

  Risks

  Delay in timing of large North American project orders; interest expense higher than expected; competition or order risks from localization of ultrapure water production in South Korea.

• Organo Corp. (6368.T)

  Covered company; a provider of global TSMC ultrapure water facilities, affected by global advanced semiconductor capital spending.

  Strengths

  TSMC's latest results show capital spending will remain aggressive in coming years, supporting Organo's high profit growth over the next several years.

  Weaknesses

  Project progress and construction delay risks led to slight cuts in FY3/27-FY3/28 operating profit forecasts, and the target price was lowered due to rising risk-free rates.

  Comparison

  Compared with Japan Material, Goldman Sachs maintains a stronger Buy view on Organo because its global TSMC facility exposure supports long-term growth.

  Risks

  Project delays; deep or prolonged decline in semiconductor investment demand; margin deterioration from North American expansion; missed opportunities due to supply shortages; construction cycles longer than expected due to revisions to labor standards laws.

• Kurita Water Industries (6370.T)

  Covered company; serves multiple major semiconductor manufacturers, while also having electronics and general industry businesses.

  Strengths

  Expected to win multiple large semiconductor manufacturer projects in FY3/27, with no signs of weakening future profit growth; shareholder returns are likely to continue expanding.

  Weaknesses

  Earnings forecasts were slightly adjusted due to shifts in project timing, and electronics business margins still need to be monitored.

  Comparison

  The target price remains unchanged in this update, and the Buy thesis comes more from steady orders and a higher valuation midpoint rather than a large one-time forecast upgrade.

  Risks

  Further margin erosion from securing strategic projects; long-term decline in semiconductor market demand; deterioration in electronics business margins; longer construction project cycles than expected due to revisions to labor standards laws.

Key data

• Japan Material target price¥2,300Raised 5% from ¥2,200, rating maintained at Neutral; FY3/28 operating profit forecast raised by 17%.
• Nomura Micro Science target price¥5,500Raised 4% from ¥5,300, rating maintained at Buy; FY3/27 operating profit forecast raised by 33%.
• Organo target price¥19,200Lowered 2% from ¥19,500, rating maintained at Buy; FY3/27-FY3/28 operating profit forecasts cut by about 1%-3%.
• Kurita Water Industries target price¥10,000Target price unchanged, rating maintained at Buy; FY3/27-FY3/29 operating profit forecasts adjusted by about -1% to +3%.
• Industry valuation benchmarkEV/EBITDA 10XThe target price methodologies for multiple companies are based on the industry or machinery industry average EV/EBITDA of 10X.
• Number of stocks covered by Goldman Sachs globally3,104As of July 1, 2026, the number of stocks covered and rated by Goldman Sachs Global Investment Research.

Impact & implications

The report has a positive investment implication: Japanese companies related to semiconductor utilities are still viewed as beneficiaries of medium- to long-term semiconductor capital spending, especially companies with exposure to global ultrapure water facilities, large U.S. projects, or projects with multiple major semiconductor customers. However, short-term stock differentiation is clear, and market expectations and valuation rerating for Japan Material are already relatively well reflected, while Buy ratings are mainly concentrated on Nomura Micro Science, Organo, and Kurita Water Industries.

Risks

• A deep or prolonged decline in semiconductor investment demand.
• Delays in large project orders or sales recognition, especially for North American projects and initial projects.
• Deterioration in margins due to shortages of materials, labor, chemicals, or supply chain constraints.
• Rising risk-free rates increase discount rates and suppress target prices.
• Execution risks from North American business expansion, localization of ultrapure water in South Korea, or longer construction cycles.
• Revisions to labor standards laws may result in longer-than-expected project cycles for construction-related businesses.

What to watch

• Whether major semiconductor companies continue to raise or maintain aggressive future capital spending plans.
• Kioxia-related capital spending, memory market strength, and the pace of new project sales recognition for Japan Material.
• Timing of large North American project wins and revenue recognition for Nomura Micro Science.
• TSMC's capital spending path and the progress of Organo's global ultrapure water facility projects.
• Kurita Water Industries' FY3/27 wins of large semiconductor customer projects, electronics business margins, and shareholder return policy.
• Changes in risk-free rates and their impact on long-term cash flow discounting and target prices.