CKD is well positioned to benefit significantly from the strong AI-driven semiconductor investment cycle; Goldman Sachs maintains Buy

Overview

This report is Goldman Sachs' company research note following CKD's participation in the Beyond the Cycle 2026 seminar. The core conclusion is that semiconductor investment demand is being jointly driven by AI servers, memory capacity expansion, advanced logic, and new wafer fab construction. CKD is seeing historically high orders and inquiries in both development investment and mass-production investment, leading Goldman Sachs to maintain its Buy rating.

Core views

Goldman Sachs believes CKD's current business environment is exceptionally strong, with Asia ex-Japan showing the strongest demand; product mix, geographic mix, and upgrades toward higher value-added functionality will continue to support profitability; CKD's market share is likely to increase, and it has the highest semiconductor-related earnings exposure among FA names. However, overheated orders also bring risks of speculative demand, delivery delays, and future easing in supply-demand conditions.

Analysis framework

The report is based on discussions with company management at the Beyond the Cycle 2026 seminar, combined with regional semiconductor capex trends, demand for products such as gas/chemicals/vacuum, the pace of development and mass-production investment, cost pass-through capability, and changes in product and geographic structure, to assess CKD's earnings elasticity and risks.

Methodology notes

• Valuation methodsFY3/28E EV/EBITDA relative valuation

  12-month target price methodology

  Goldman Sachs' 12-month target price of ¥10,000 is based on the average FY3/28E EV/EBITDA, using the sector average multiple of 10x and applying a 30% relative premium.

• Factor analysisGS Factor Profile

  Growth, financial returns, valuation multiples, and composite factors

  Goldman Sachs compares stocks with the market and industry peers using growth, financial returns, valuation multiples, and composite factors; growth uses forward sales, EBITDA, and EPS growth, financial returns use ROE, ROCE, and CROCI, and valuation multiples use metrics such as P/E, P/B, P/D, EV/EBITDA, and EV/FCF.

• M&A frameworkM&A Rank

  Acquisition target probability score

  Goldman Sachs uses scores from 1 to 3 to assess the probability that a company becomes an acquisition target, where 1 indicates high probability, 2 indicates medium probability, and 3 indicates low probability; for companies rated 1 or 2, Goldman Sachs' standard process incorporates M&A factors into the target price.

Asset mapping & comparison

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

• CKD (6407.T)

  Research target; a beneficiary company of semiconductor-related FA and fluid control demand

  Strengths

  Orders and inquiries are at historical highs, with strength in both development investment and mass-production investment; demand is tight for gas, chemicals, and vacuum products; upgrades in product functionality, a higher share of system products, and an improved geographic mix in mainland China support margins.

  Weaknesses

  It is difficult to distinguish real demand from speculative demand, and adjustments have already begun internally for some products; differences in unit product value-added are large, making market share harder to track precisely than in the past.

  Comparison

  Goldman Sachs says CKD is the stock with the highest semiconductor-related earnings exposure among FA names, and believes its growth rate is outperforming the favorable semiconductor market, with market share likely rising.

  Risks

  Semiconductor demand weaker than expected, significant increases in input costs, fixed cost growth faster than expected, and easing supply-demand conditions after overheated customer competition.

Key data

• RatingBuyBoth the report title and main text indicate that Goldman Sachs maintains Buy.
• 12-month target price¥10,000Based on FY3/28E EV/EBITDA, the sector average multiple of 10x, and a 30% relative premium.
• Current price¥6,640The disclosure section shows 'CKD (¥6,640)'; the source text does not separately label it as the current price in the main body.
• Estimated upsideapproximately 50.6%Calculated based on the ¥10,000 target price and the ¥6,640 price.
• Historical market share of precision businessapproximately 40%CKD previously stated that its global market share in the precision business was about 40%, and the company now believes that share may continue to expand.
• Supply structure of precision businessmore than 50%The report states that more than 50% of products currently supplied in the precision business are system products or development products.
• Profitability of mainland China projectsestimated above 20%Goldman Sachs estimates that the profitability of some mainland China projects can be comparable to that of the Japan business and is clearly above 20%.
• Duration of mainland China demandat least through 2027CKD believes that inquiries related to advanced AI and memory investment in mainland China are strong, and the favorable environment may continue at least through 2027.
• Key product categoriesgas, chemicals, vacuumDemand growth covers all major product categories, and supply-demand conditions are broadly tight.

Impact & implications

If investment in AI servers, memory, and advanced logic continues to expand, CKD is expected to achieve higher revenue growth and margins through higher value-added products, cost pass-through, system-based supply, and localized expansion in mainland China. However, if customer competition leads to excessive investment, or if some orders are proven to reflect advance stockpiling and speculative demand, supply-demand conditions may loosen rapidly in the later stage of the cycle.

Risks

• Semiconductor demand weaker than expected.
• Significant increases in input costs such as raw materials.
• Fixed cost growth faster than expected.
• Against a backdrop of strong orders, it is difficult to distinguish real demand from speculative demand.
• Overheated competition among customers in South Korea and mainland China may lead to a rapid subsequent easing in supply-demand conditions.
• Delivery delays or capacity bottlenecks may affect customer response and order fulfillment.

What to watch

• The investment intensity and persistence of competition among major Korean memory manufacturers.
• Whether advanced AI and memory investment in mainland China continues through 2027 as management expects.
• CKD's verification results regarding order authenticity, and whether adjustments emerge after advance stockpiling.
• The degree of supply-demand tightness and delivery lead times for products such as gas, chemicals, and vacuum.
• Progress in cost pass-through for development products and newly adopted products.
• Changes in the mix of system products, development products, and high-function unit products.
• The contribution of local production expansion in mainland China to market share and margins.