UK-based activist investor Palliser Capital has taken a big stake in Japan’s Toto—the corporate finest identified for heated bathroom seats and Washlet bidets—calling it “essentially the most undervalued and missed AI reminiscence beneficiary.” The fund despatched a letter to Toto’s board final week, urging the corporate to do a greater job of showcasing its superior ceramics enterprise, which quietly contributes over 40% of working revenue.On the coronary heart of Palliser’s argument are electrostatic chucks (ESCs)—precision ceramic elements that maintain silicon wafers in place throughout reminiscence chip manufacturing. Toto has been making these for the reason that Nineteen Eighties, drawing on many years of ceramics know-how that initially got here from constructing bogs. But it surely’s solely in recent times, with AI-driven demand sending reminiscence chip costs by way of the roof, that this aspect of the enterprise has began pulling severe weight.
Toto’s ceramics are constructed for the sort of excessive chilly that superior chip-making calls for
The corporate’s ESCs are engineered to remain steady at very low temperatures, making them important for cryogenic etching—a course of used to carve ultra-deep channels in 3D NAND chips that at the moment are stacked over 200 layers excessive. As reminiscence architectures get extra advanced, the necessity for elements like Toto’s solely grows. The chucks mix cold-resistant ceramics with built-in heaters and cooling channels to keep up uniform wafer temperatures even underneath intense plasma and vacuum circumstances.Palliser, now amongst Toto’s prime 20 shareholders, believes the corporate holds a five-year aggressive moat earlier than rivals can catch up. The fund initiatives 30% or extra income development for the ceramics phase over the following two years, fuelled by the continued NAND improve cycle.
Shares are up 60% in a 12 months, however Palliser sees one other 55% upside
Toto’s inventory has already climbed sharply—up over 60% up to now 12 months and almost 40% in 2026 alone. Goldman Sachs upgraded the inventory to “purchase” final month, pointing to revenue development potential from increasing AI knowledge centre investments. Nonetheless, Palliser argues the market hasn’t totally caught on, estimating a valuation hole of roughly ¥554 billion ($3.6 billion). The fund says fixing disclosure, tightening capital allocation, and placing Toto’s ¥76 billion ($496 million) web money to higher use might unlock that worth.
Palliser has been pushing onerous throughout company Japan
Based by former Elliott Administration govt James Smith, Palliser has grow to be a key participant in Japan’s shareholder activism wave. Its different stakes embrace property agency Tokyo Tatemono, Keisei Electrical Railway, and Japan Submit Holdings. The fund purchased into Toto roughly six months in the past and isn’t simply asking for higher storytelling—it needs extra funding directed towards the high-margin ceramics unit slightly than the slower-growing rest room enterprise. When a rest room maker is being pitched as essential AI infrastructure, it’s an indication the growth is reshaping provide chain considering in methods few noticed coming.
