Strong Semiconductor Business Offsets Near-Term Profit Pressure, with Concentrated Contribution Expected in 4Q

Overview

Rigaku Holdings maintained revenue growth in 2Q, but operating profit was only ¥1.9bn, below Bloomberg expectations of ¥3.0bn and JPMorgan expectations of ¥4.0bn. Multi-purpose analytical instruments recovered more slowly than expected due to U.S. university budget cuts; meanwhile, semiconductor process control instruments performed strongly, driven by memory capacity expansion, logic demand, and a recovery among North American IDMs. The company maintained its full-year guidance and expects results to be heavily concentrated in 4Q.

Core views

Near-term results show relatively resilient revenue but pressure on profits. Operating profit in 1H reached only 13% of full-year guidance, and 3Q is expected to be roughly in line with 2Q, so achieving the full-year target depends heavily on 4Q deliveries. The positive factor is that semiconductor-related inquiries remain strong, the company has already secured most FY2026 orders, and sales of semiconductor process control instruments are expected to exceed full-year guidance. Over the long term, semiconductor miniaturization and multilayering increase the difficulty of traditional optical and CD measurements, which is expected to raise demand for X-ray inspection; with its existing market position and project experience, Rigaku is expected to achieve growth above the industry level.

Analysis framework

The report first breaks down second-quarter revenue, operating profit, and order changes by business segment, then compares actual results with company guidance, Bloomberg expectations, and JPMorgan forecasts; it then combines order coverage, joint evaluation projects, and delivery schedules to assess growth visibility for FY2026 and FY2027; valuation uses a sum-of-the-parts method based on FY2026 forecasts and applies a 10% discount for conglomerate attributes.

Methodology notes

• Valuation methodsSum-of-the-Parts Method

  Assess each business segment separately and then aggregate enterprise value

  The report values multi-purpose analytical instruments, semiconductor process control instruments, components and services, and corporate-level costs separately, then incorporates net debt to derive theoretical value per share.

• Relative ValuationEV/EBITDA

  Assign different valuation multiples based on business growth and quality

  Semiconductor process control instruments use a 45x EV/EBITDA multiple, while other major businesses and corporate costs use 14x, reflecting higher growth expectations for the semiconductor business.

• Valuation AdjustmentConglomerate Discount

  Apply a discount to the theoretical value of a diversified business portfolio

  The theoretical value per share derived from the sum-of-the-parts valuation is approximately ¥3,428, and applying a 10% conglomerate discount results in a ¥3,100 target price.

Asset mapping & comparison

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

• Rigaku Holdings (268A.T)

  Japanese listed company stock directly covered by the report

  Strengths

  Strong market position and project experience in semiconductor X-ray inspection; strong memory and logic demand; high FY2026 order coverage; increasing pipeline of joint evaluation projects.

  Weaknesses

  Delayed recovery in multi-purpose analytical instruments; low profit completion rate in 1H; material costs, FX, and upfront investments are suppressing gross margin; results depend heavily on 4Q.

  Comparison

  Compared with traditional optical and CD measurement solutions, the importance of X-ray inspection is expected to increase in an environment of semiconductor miniaturization and multilayering; the report expects the company's growth to exceed the overall market.

  Risks

  Downturn in the semiconductor cycle, rapid advances in optical or CD measurement technologies, delays in semiconductor complexity trends, delays in new factory ramp-up, and slow improvement in X-ray equipment throughput.

Key data

• Second-quarter sales¥21.6bnUp 7% YoY and 21% QoQ.
• Second-quarter operating profit¥1.9bnDown 32% YoY and approximately 3 times the previous quarter; below Bloomberg expectations of ¥3.0bn and JPMorgan expectations of ¥4.0bn.
• Operating profit of multi-purpose analytical instruments¥0.3bnDown 78% YoY, but improved from a ¥0.2bn loss in 1Q; orders increased 6% YoY.
• Operating profit of semiconductor process control instruments¥1.4bnUp 69% YoY and approximately 2.8 times the previous quarter, with both memory and logic demand increasing significantly.
• Operating profit of components and services¥0.6bnDown 61% YoY and 40% QoQ, with businesses such as EUV multilayer mirrors remaining weak.
• FY2026 sales guidance¥101.0bnUp 7% YoY; the company maintained guidance, and the report judges that actual sales may exceed this level.
• FY2026 operating profit guidance¥19.4bnUp 16% YoY; 1H achieved only 13% of full-year guidance, and achieving the target depends on volume ramp-up in 4Q.
• Joint evaluation projects14As of the end of 1H FY2026, already equivalent to the full-year FY2025 level, and expected to continue increasing in 2H.
• Target price¥3,100Based on FY2026 sum-of-the-parts valuation, with a target date of December 2026.
• Implied upsideApproximately 42.8%Calculated based on the August 7, 2026 share price of ¥2,171.

Impact & implications

Second-quarter profit below expectations may reinforce market concerns about the pace of full-year earnings delivery, but the semiconductor business's order coverage and inquiry strength reduce uncertainty on the revenue side. If 4Q deliveries proceed smoothly and price adjustments and new products can offset material costs, FX, and upfront investment pressure, profitability is expected to improve significantly; continued growth in joint evaluation projects may enhance growth visibility after FY2027. Conversely, delays in 4Q deliveries or further deterioration in gross margin would significantly increase the risk of a downward revision to full-year profit guidance.

Risks

• Continued U.S. university budget cuts may keep weighing on demand for multi-purpose analytical instruments, potentially further delaying the business recovery.
• Rapid increases in material costs, adverse FX movements, and upfront investments may continue to depress gross margin and operating profit.
• Full-year results are highly concentrated in 4Q; if production, delivery, or revenue recognition is delayed, full-year guidance may be difficult to achieve.
• A downturn in the semiconductor industry may weaken demand for memory, logic, and equipment investment.
• If traditional optical or CD measurement technologies see significant breakthroughs, the relative attractiveness of X-ray inspection solutions may decline.
• A slowdown in semiconductor miniaturization and multilayering, delays in new factory ramp-up, or weaker-than-expected improvement in X-ray equipment throughput could all limit growth.
• J.P. Morgan disclosed that it has market-making, underwriting, client, and investment banking service relationships with Rigaku Holdings; investors should pay attention to potential conflicts of interest.

What to watch

• Whether third-quarter operating profit can reach a level roughly comparable to the second quarter.
• The progress of production, delivery, and revenue recognition for semiconductor equipment orders in 4Q.
• Whether FY2026 sales can exceed the ¥101.0bn guidance, and whether operating profit can reach ¥19.4bn.
• After orders for multi-purpose analytical instruments bottomed in 2Q, whether 3Q can achieve management's expected YoY growth of more than 50%.
• Whether semiconductor process control instruments exceed full-year guidance, especially the contribution from memory capacity expansion and the recovery among North American IDMs.
• Whether the number of joint evaluation projects can continue to increase in 2H and convert into FY2027 revenue.
• Whether price adjustments, new product launches, and other improvement measures can offset pressure from material costs, FX, and upfront investments.