ICHOR HOLDINGS, LTD. (ICHR) stock intrinsic value fair value estimate & owner earnings analysis

Ichor designs and builds the gas and chemical delivery subsystems that go inside semiconductor manufacturing equipment. It is a supplier to equipment makers, not a chip maker. Its business is highly concentrated: Applied Materials ($371.7 million) and Lam Research ($351.4 million) together were 76% of 2025 sales of $947.7 million. Neither is bound by a long-term contract to order any quantity, although both have been customers for over 20 years, and the filing says these customers use their size to push for lower prices. What the numbers show. We measure owner earnings as operating cash flow, less swings in working capital, less stock-based compensation, less the part of capital spending needed to maintain the business. On that basis Ichor earned about $1.94, $2.55, $0.62, $2.39, $2.74 and $2.90 per share in 2017 through 2022, then lost $0.48, $0.22 and $0.88 per share in 2023, 2024 and 2025. Sales in 2025 were higher than in 2019 or 2017, yet the business earned less, because gross profit was thin ($87.8 million, or 9.3% of sales, versus $103.3 million and 12.2% in 2024), stock compensation ran $16 to $17 million a year in 2023 through 2025, and capital spending rose to $36.2 million in 2025. Working capital was removed from the calculation because it swings sharply with sales: it absorbed cash in the 2021 to 2022 boom and released cash in 2023. The 2025 net loss of $52.8 million also included roughly $19.8 million of non-cash inventory write-downs, which we treated as a sunk cost rather than an ongoing one. Level used. We measure normal earning power as the median of 2019 through 2025, $0.62 per share. That window runs from the 2019 downturn through the 2020 to 2022 boom and the 2023 to 2025 slump, so it holds a full cycle. We start at 2019, the low point in sales among recent years, and no years were excluded. Recent quarters do not move that level: in the first half of 2026 sales were $550.9 million, up from $484.8 million a year earlier, and the company was roughly break-even (net loss $1.5 million versus $14.0 million), including a $1.0 million profit in the second quarter. That is one profitable quarter, not yet a trend. Operating cash flow in that half was negative $18.8 million, against positive $11.5 million a year earlier, and we could not attribute that swing from the filings we reviewed. Growth path. Owner earnings per share worsened in the latest fiscal year, from negative $0.22 to negative $0.88, and our base case assumes about zero in the first year, which is higher than that. The specific reason is the Consolidation Restructuring Plan approved in the third quarter of 2025: the company took about $35 million of restructuring, exit, severance and related asset impairment charges in 2025, including $20.7 million in cost of sales, while closing its Scotland and Korea facilities. Those charges do not repeat, and the second quarter of 2026 was profitable against a $9.4 million loss in the second quarter of 2025. We credit no revenue growth, no market recovery and no margin gains. Base case, about $6.20 per share. Owner earnings of roughly zero in year one, $0.30 in year two, then $0.62 a year through year 20, valued at a 6% discount rate. We stop at year 20 because nothing in the filings shows what would carry earnings beyond that. The support for the 20 years is the 20-plus-year record with Lam Research and Applied Materials and the fact that Ichor earned positive owner earnings in six of the last nine years, but there are no contracts guaranteeing it. Bear case, about negative $1.70 per share. The 2023 to 2025 pattern continues: owner earnings of about negative $0.50 per share (the average of those three years was negative $0.53) for four more years, and then nothing that we can name and evidence continues. Ichor had $125.0 million of debt at the end of 2025 against $98.3 million of cash, and a variable interest rate. In this case the shares appear worth less than nothing: the four years of cash burn are worth about negative $1.70 per share (roughly $58 million) in today's dollars, and the company appears to owe more than the business is worth. Other named risks include the 76% customer concentration and the Singapore tax holiday, which expires in 2026 and was worth about $3.4 million in 2025. Bull case, about $19.80 per share. Restructuring savings and lower capital spending (first-half 2026 spending was $14.8 million versus $25.8 million a year earlier) let owner earnings climb from $0.20 in year one to $0.80 and $1.50, then settle at $2.00 a year through year 20. That level is not new: Ichor earned between $1.94 and $2.90 per share in five of the years from 2017 to 2022. We do not assume a market boom. What would make us wrong. If the two large customers move more work in-house or push prices down further, the bear case applies. If the plant closures do not restore margins, the base case is too high. If the business earns again what it earned in 2020 to 2022 without any further help, the bull case is closer. Judgement calls. Non-cash charges (depreciation, intangible amortization, inventory write-downs) are added back through operating cash flow. Growth capital spending was estimated at 2.0% of each year's sales increase; in 2025 that left $34.2 million as maintenance spending. We used company-reported debt as a bear-case risk only and did not subtract it from value. Because the bear case is negative, margins are thin and two customers dominate sales, the margin-of-safety price is set with a wide margin of safety.