Ebara Corporation
Diversified capital-equipment manufacturer across five segments -- Building Service & Industrial (pumps/compressors/chillers), Energy (custom pumps, compressors, turbines for oil/gas/power), Infrastructure (water/sewage systems), Environmental Solutions (waste-to-energy plants), and Precision Machinery (semiconductor CMP tools, dry vacuum pumps, gas abatement). Mix of long-cycle project/EPC revenue, high-margin semiconductor equipment, and recurring aftermarket service/parts.
Earnings, margins, COGS & capex
FY2025 was a record year: revenue Y958.3B (+10.6%), operating profit Y115.6B (12.1% margin), net income Y76.6B, EPS ~Y166, ROE ~15.6%, with orders crossing Y1T for the first time. Growth was led by the Precision Machinery (semiconductor) segment on AI-driven logic/foundry demand, plus Environmental Solutions and Infrastructure. The standout tension: record P&L alongside negative free cash flow (-Y51.5B), as Ebara front-loaded capex (~Y92.2B) to expand CMP and vacuum-pump capacity (new Kumamoto site) for the 2nm/AI capex cycle. Management raised the FY2026 profit outlook after a record Q1 FY2026, and set E-Plan 2028 targets of ~Y1.2T revenue at 14.5%+ operating margin, 18%+ ROE and 13%+ ROIC, with an E-Vision 2035 long-term ambition of Y2T+ revenue at 20%+ OP margin and 25%+ ROE.
Income statement — where each revenue dollar goes
% of revenueOf every $1 of revenue, ~67¢ is cost of goods and ~21¢ operating expense, leaving ~12¢ of operating profit (~8¢ net).
Revenue trend
Margins
Roughly stable (~32.0% FY2023 -> ~33.1% FY2024 -> 32.6% FY2025)
Gently rising toward the E-Plan 2028 target of 14.5%+ (E-Vision 2035: 20%+)
Stable-to-up (Y76.6B on Y958.3B)
Strong; E-Plan 2028 targets 18.0%+ (E-Vision 2035: 25%+)
Highest-margin segment; the mix-shift engine
COGS structure
Cost base is metals/castings, motors, precision components, electronics, and project/EPC labor. Gross margin ~32-33% reflects a blend of commoditized industrial pumps (thinner margin) and high-value semiconductor precision tools + aftermarket service (richer margin). Segment mix-shift toward Precision Machinery is the primary gross-margin lever.
Capex
~Y92.2B in FY2025 (vs ~Y50.9B FY2024), sharply elevated to expand CMP and dry-vacuum-pump manufacturing capacity, including a new Kumamoto plant (K3) sized for the foundry/AI ramp. This capex is what pushed FY2025 free cash flow negative (-Y51.5B) despite record earnings -- a deliberate growth investment, not distress.
Latest earnings
Beat / ahead; record orders, revenue and profit led by Precision Machinery and AI demand
FY2026 profit outlook and EPS raised after Q1, with an additional gain flagged from a share transfer; company-wide orders/revenue/OP guidance otherwise maintained. FY2026 dividend planned at Y66/share. E-Plan 2028: ~Y1.2T revenue, 14.5%+ OP margin, 18%+ ROE, 13%+ ROIC.
- FY2025 revenue
- Y958.3B (+10.6%)
- FY2025 operating profit
- Y115.6B (12.1% margin)
- FY2025 net income
- Y76.6B
- FY2025 EPS
- ~Y166 (Y166.15 diluted / Y166.31 basic)
- FY2025 ROE
- ~15.6%
- FY2025 orders
- >Y1T (first time)
- FY2025 free cash flow
- -Y51.5B (OCF Y40.8B, capex Y92.2B)
- FY2025 dividend / payout
- Y59/share, ~35% payout, ~1% yield (FY2026 plan Y66/share)
Growth drivers
- AI/leading-edge semiconductor capex — foundry migration to 2nm logic driving CMP tool and dry-vacuum-pump demand (Precision Machinery is the top orders/margin driver)
- Advanced packaging / hybrid bonding — new F-REX300XA CMP system launched for high-volume hybrid-bonding manufacturing
- Aftermarket & service — recurring parts/service revenue across the huge installed base of pumps and semiconductor tools
- Environmental Solutions — large-scale waste-to-energy and municipal infrastructure projects (a non-cyclical counterweight to chips)
- Data-center & power buildout — pumps, compressors, and cooling equipment tied to energy and building-services demand
- Geographic re-mix — pivot of semiconductor sales away from China (which was ~30% of segment) toward logic/foundry customers in Taiwan, Korea, US
Bull & bear
A structurally advantaged picks-and-shovels play on AI-era leading-edge semiconductor manufacturing -- one of only two credible global CMP suppliers -- wrapped in a diversified, underlying-cash-generative industrial franchise. The catch: the market has already re-rated it toward semiconductor-equipment multiples (~35x trailing), so the case now rests on earnings compounding rather than a cheap entry point.
- Effective CMP duopoly with Applied Materials means Ebara captures a required, hard-to-displace step in every advanced logic/memory fab -- rising content as nodes shrink to 2nm and packaging goes 3D
- Record FY2025 (revenue +10.6%, 12.1% OP margin, ~15.6% ROE, orders >Y1T) with FY2026 outlook raised on AI demand -- momentum is real, not hoped-for
- The negative FY2025 FCF is deliberate growth capex (~Y92.2B, Kumamoto capacity) that should convert to a step-up in Precision Machinery revenue and margin as the plant fills
- E-Plan 2028 credibly targets ~Y1.2T revenue at 14.5%+ margin, 18%+ ROE and 13%+ ROIC -- a visible margin-expansion runway from mix-shift, with E-Vision 2035 reaching for Y2T+ revenue
- Diversification (water, environmental, energy) provides a cushion the pure-play equipment names lack, dampening the chip cycle
- At ~35x trailing the stock is no longer cheap, but sits roughly in-line with pure-play semi-equipment names while carrying a diversification cushion -- continued Precision Machinery compounding can carry the stock on earnings growth even without further re-rating
A cyclical industrial trading at a full growth multiple: record earnings coincide with negative free cash flow, the highest-margin business is the most cyclical, and at ~35x trailing a foundry capex pause would expose an aggressive capacity bet made near the top of the AI cycle.
- FY2025 free cash flow was -Y51.5B -- the market is paying ~35x trailing earnings for a company currently consuming cash; if the ~Y92.2B capex doesn't convert to filled capacity and margin, the multiple is unsupported
- Precision Machinery, the margin engine, is also the most cyclical and lumpy segment -- a semiconductor capex air-pocket hits earnings and sentiment simultaneously
- Blended operating margin (~12%) is structurally capped by low-margin commodity pump/industrial businesses; hitting 14.5%+ requires flawless mix-shift execution
- Capacity added at the top of the AI cycle risks under-utilization and ROIC erosion if leading-edge foundry spend normalizes
- Applied Materials dominates CMP (~70% vs Ebara ~25%) and can compete hard on price/technology; vacuum-pump share (~9%) trails Edwards/Atlas Copco (~22%) and Pfeiffer/Busch (~14%)
- Export controls and the deliberate wind-down of ~30% China semiconductor exposure create a near-term revenue hole the company must backfill
- US investors get only an illiquid OTC ADR and JPY/FX translation -- structurally limited ownership and liquidity
What it is worth
Trailing P/E and sum-of-the-parts framing (semiconductor-equipment segment at a premium multiple, industrial/water segments at industrial-machinery multiples), sanity-checked against pure-play semi-equipment peers.
De-rating toward diversified-industrial / trough-cycle multiples (~18-25x) if a semiconductor capex pause hits Precision Machinery, the new capacity under-fills, and FCF stays negative -- a large drawdown from ~35x, compressing both the multiple and the earnings base.
Holds ~30-35x as AI/semi-capex sentiment persists; returns track earnings growth plus the ~1% dividend, with negative near-term FCF and cyclicality capping further re-rating.
Earnings keep compounding into the ~35x multiple -- Precision Machinery grows toward the 15%+ segment margin, FCF turns firmly positive, and E-Plan 2028 (Y1.2T rev, 14.5%+ OPM, 18%+ ROE) proves achievable -- carrying the stock on EPS growth even without further multiple expansion (most of the re-rating has already happened).
At ~Y2.77T (~$18.7B; companiesmarketcap.com ~$17.5B) market cap on FY2025 net income of Y76.6B, Ebara trades at ~35x trailing earnings (stockanalysis.com 35.2x, Google Finance ~33x as of Jul 6, 2026) -- up from ~25x on the Mar-2026 price (Y4,254) as the stock re-rated toward semiconductor-equipment multiples. That is now a clear premium to diversified industrial-pump peers (Xylem, Flowserve, Sulzer typically ~18-24x) and roughly in-line to a modest premium versus pure-play semiconductor-equipment names (AMAT/LRCX ~25-35x, TEL higher). The valuation debate hinges on how much of Ebara is credited as a semiconductor-equipment franchise vs a cyclical industrial. Key swing factors: FY2026+ free-cash-flow recovery, Precision Machinery margin trajectory toward the 15%+ target, and durability of the AI capex cycle. Not financial advice.
SWOT
Strengths
- Effective CMP duopoly — the clear #2 supplier of leading-edge CMP (chemical-mechanical planarization) polishing tools (~25% share via the F-REX family) behind Applied Materials (~70%); together they control the high-volume production market
- Century-plus (founded 1912) engineering franchise with deep IP in fluid dynamics, rotating machinery, and precision surface processing
- Genuine diversification — five segments spanning cyclical semiconductor equipment and non-cyclical water/environmental infrastructure, smoothing the chip cycle
- Record FY2025 financials with rising margins and ~15.6% ROE; orders crossed Y1T for the first time
- Large recurring aftermarket/service base across pumps and semiconductor tools
- Direct leverage to the strongest secular capex theme in tech (AI-driven leading-edge foundry buildout)
Weaknesses
- Negative free cash flow in FY2025 (-Y51.5B) — earnings quality pressured by the capex ramp; FCF conversion is the watch item
- Semiconductor segment is cyclical and lumpy; orders can swing sharply with foundry/memory capex timing
- Operating margin (~12%) is below best-in-class semiconductor-equipment peers (Lam, AMAT, TEL run 25-30%+) -- the industrial pump businesses dilute the mix
- China semiconductor exposure was ~30% of the segment and is being deliberately wound down amid export-control and demand risk
- Lower-margin, competitive commodity pump/industrial businesses drag blended profitability
- JPY-reporting, Tokyo-listed — limited direct US-investor access (only an illiquid OTC ADR), FX translation noise
Opportunities
- 2nm logic + advanced-packaging/hybrid-bonding transition expands CMP and abatement content per fab
- Data-center thermal/cooling and power-infrastructure demand for pumps and compressors
- Share gains in dry vacuum pumps and gas abatement as fabs diversify suppliers away from Edwards/Pfeiffer
- Environmental / waste-to-energy and water-infrastructure spend in Japan and emerging markets
- Margin expansion toward E-Plan 2028 targets (14.5%+ OP margin, 18%+ ROE) via Precision Machinery mix-shift and pricing
- Aftermarket monetization of a growing installed base of semiconductor tools
Threats
- Semiconductor capex downturn -- a foundry/memory air-pocket would hit the highest-margin segment hardest
- Applied Materials (the CMP market leader) and well-capitalized vacuum peers (Edwards/Atlas Copco, Pfeiffer/Busch) pressing on price and technology
- Export controls / geopolitics constraining sales to Chinese fabs and complicating supply chains
- Capex overshoot risk -- if the AI cycle cools before the new capacity is absorbed, ROIC and FCF suffer
- FX (JPY) volatility and Japan-specific cost inflation
- Customer concentration among a handful of leading-edge foundries (TSMC, Samsung, Intel)
Moats, dependencies & bottlenecks
Moats
The clear #2 (~25% share) in leading-edge CMP polishing tools behind Applied Materials (~70%); deep process IP, qualified into foundry/memory lines, high switching cost once designed in.
Large installed base of pumps and semiconductor tools generates sticky recurring service/parts revenue.
Century of fluid-dynamics/rotating-machinery and surface-processing know-how; hard to replicate, but faces large well-funded competitors in each niche.
Semiconductor tools/pumps must be qualified per fab process -- long, costly to displace once in production, but requalification risk exists at node transitions.
Water, environmental, and energy segments buffer the chip cycle -- a resilience moat rather than a pricing moat.
Dependencies
Customer concentration Precision Machinery revenue rides a handful of advanced-node capex budgets; timing and magnitude are outside Ebara's control.
End-market demand The primary growth and margin driver; a capex downturn hits the best business hardest.
Competitive structure Duopoly is favorable but AMAT's ~70% scale sets the competitive/pricing ceiling.
China semiconductor sales (~30% of segment) constrained by controls; forces a demand re-mix.
Castings, motors, electronics inputs; cost inflation pressures gross margin.
Reports in JPY with large export revenue; translation and competitiveness both FX-sensitive.
Advantages
- Effective CMP duopoly status (#2 at ~25% behind AMAT) -- a required tool in every advanced fab
- Dual exposure: high-growth chips + stable water/environmental infrastructure
- Record orders (>Y1T) and rising ROE (~15.6%) with a credible margin-expansion plan
- Sticky aftermarket/service revenue across a large installed base
- Direct, high-quality leverage to the AI/2nm secular capex wave
- Century-long engineering brand and customer relationships
Weaknesses
- Negative FY2025 free cash flow (-Y51.5B) despite record earnings
- ~12% blended operating margin trails pure-play semi-equipment peers
- High cyclicality concentrated in the most profitable segment
- Vacuum-pump share (~9%) well behind category leaders
- Limited US-investor access (illiquid OTC ADR only)
- China exposure wind-down creates a near-term revenue gap
- At ~35x trailing, valuation now prices in continued AI-capex strength
Bottlenecks
- Free-cash-flow conversion -- capex must translate into filled capacity and margin, or the growth story stalls
- Manufacturing capacity ramp execution at the new Kumamoto (K3) site during peak demand
- Blended margin ceiling imposed by the low-margin industrial pump businesses
- Backfilling the deliberately shed ~30% China semiconductor revenue
- Skilled precision-engineering and semiconductor process talent
Top signals & trends
Top signals
Demand breadth across AI semiconductors and environmental projects.
Precision Machinery + AI demand driving upgrades; plus a one-off share-transfer gain.
Bearish / watch · Growth capex consuming cash; FCF recovery is the key proof point.
Positions Ebara for advanced-packaging content growth.
De-risks geopolitics but leaves a revenue gap to backfill with logic/foundry.
Management committing publicly to margin/return expansion.
Mixed / watch · The AI-semi re-rating has largely happened; leaves less valuation cushion if the cycle cools.
Trends
Core demand tailwind for CMP tools, vacuum pumps, and abatement.
New CMP content per wafer as 3D integration scales.
Opens share-gain paths outside China but caps China revenue.
Pump/compressor/thermal demand in energy and building services.
Stable, counter-cyclical demand for pumps and waste-to-energy plants.
The same wave that drives upside can reverse sharply.
Ecosystem & competitor graph
Suppliers feed the company; customers pull from it. Line thickness shows the strength of each tie (supply-chain dependency, customer earnings contribution). Hover to isolate a tie.
Metals / castings & precision-component suppliers Steel, alloy castings, machined precision parts for pumps and tools -- key COGS input.
Motors, drives, and power electronics for pumps and compressors.
Semiconductor-grade CMP slurries/pads and process consumables adjacent to Ebara's polishing tools.
Sensors, controllers, and automation components for precision tools and systems.
Leading-edge foundry; a preferred platform for Ebara's dry vacuum pumps and CMP tools.
Logic + memory foundry customer for CMP, vacuum, and abatement.
Leading-edge logic/foundry customer for semiconductor equipment.
Memory maker; semiconductor-tool customer.
Memory/HBM maker riding AI demand; semiconductor-equipment customer.
Buyers of water/sewage systems, waste-to-energy plants, and industrial pumps/compressors.
Global CMP market leader (~70% share) and Ebara's primary head-to-head competitor in semiconductor polishing tools; the two effectively form a leading-edge CMP duopoly (Ebara ~25%).
Major semiconductor process-equipment peer; competes for fab capex wallet and adjacent process steps.
Japanese semiconductor-equipment giant; broad tool portfolio, competes for the same foundry capex.
Global leader in semiconductor dry vacuum pumps (~22% share) via Edwards -- direct competitor to Ebara's vacuum-pump line.
~14% vacuum-pump share; second-largest vacuum competitor to Ebara.
Japanese vacuum-equipment maker (~10% dry-pump share); competes in vacuum and thin-film adjacencies.
Global water-technology/pumps leader; competes with Ebara's water infrastructure and industrial pump businesses.
Flow-control/pumps competitor in energy and industrial end-markets.
Swiss pumps/rotating-equipment competitor in energy and industrial fluid handling.
CMP-ecosystem player (slurry/pad consumables + materials adjacency); overlaps the CMP value chain.