Summary of Advanced Micro-Fabrication Equipment Inc. (AMEC) Conference Call Company Overview - **Company**: Advanced Micro-Fabrication Equipment Inc. (AMEC) - **Ticker**: 688012.SS - **Industry**: Semiconductor Equipment Manufacturing Key Financial Results - **3Q25 Net Profit**: Rmb505 million, up 28% YoY, beating consensus estimate of Rmb478 million by 6% [1][11] - **Revenue**: Rmb3.1 billion, a 51% YoY increase, driven by 35% YoY growth in etching equipment sales and Rmb204 million from LPCVD/ALD [1][11] - **Gross Profit Margin (GPM)**: Decreased by 5.8 percentage points YoY to 37.8% due to price discounts for large customers [1][11] - **R&D Expenses**: Increased by 96% YoY to 21.8% of total revenue, reflecting investment in new equipment development [2] Growth Drivers and Market Dynamics - **Import Replacement Demand**: Strong revenue/order growth expected from Chinese logic customers, particularly in memory sectors [3] - **Capacity Expansion**: Foundries in South China, including Pengxinwei and Pensun, are expanding capacities, which may benefit AMEC [3] - **New Product Launches**: Introduction of 90:1 HAR etching machines aimed at supporting Chinese memory customers in producing advanced 3D NAND [3] Valuation and Investment Outlook - **Target Price**: Raised to Rmb352, reflecting a ~63% increase based on a revised P/S multiple of ~13x for 2026E [4][22] - **Investment Rating**: Reiterated Buy due to strong revenue growth prospects and ongoing import replacement trends [4][21] Earnings Forecast Revisions - **2025E Revenue**: Revised to Rmb12.449 billion, a 1% increase from previous estimates [12] - **2026E Revenue**: Revised to Rmb16.603 billion, a 2% increase [12] - **Net Profit Forecasts**: Adjusted downwards for 2025E and 2026E due to anticipated lower margins [12] Risks and Challenges - **Market Risks**: Potential impacts from stricter US restrictions, a weaker semiconductor cycle, and lower-than-expected GPM [23] Additional Insights - **Market Capitalization**: Approximately Rmb185.75 billion (US$26.17 billion) [6] - **Expected Total Return**: 18.8%, including a dividend yield of 0.1% [6] - **Long-term Growth**: Management projects at least 30% YoY revenue and new order growth in 2025 [21] This summary encapsulates the essential points from the conference call regarding AMEC's financial performance, market position, growth strategies, and investment outlook.

Investment Rating - The report maintains a Buy rating on Advanced Micro-Fabrication Equipment (AMEC) with a target price of Rmb220, indicating an expected share price return of 14.9% and a total expected return of 15.1% [2][15]. Core Insights - AMEC's 2024 results showed revenue and gross profit growth of 45% and 36% year-over-year, respectively, aligning with preliminary results. However, net profit decreased by 9% year-over-year to Rmb1.61 billion due to lower investment incomes [1]. - The gross profit margin (GPM) contracted by 2.8 percentage points year-over-year to 41.1% in 2024, attributed to price discounts offered to customers in China [1]. - Operating cash flow (OCF) improved significantly to Rmb1.46 billion cash inflow in 2024, compared to Rmb977 million outflow in 2023 [1]. - Despite the challenges, the report emphasizes that AMEC's solid fundamentals and the import replacement thesis remain intact [1]. Summary by Sections Earnings Summary - In 2024, AMEC's net profit is projected at Rmb1,626 million, with a diluted EPS of Rmb2.626, reflecting an EPS growth decline of 8.8%. For 2025, net profit is expected to rise to Rmb2,391 million, with an EPS of Rmb3.862, indicating a growth of 47.1% [4]. - The report outlines a decreasing P/E ratio from 72.9 in 2024E to 49.6 in 2025E, suggesting improved valuation metrics over time [4]. Market Comparison - The report indicates a preference for NAURA (002371.SZ) over AMEC due to NAURA's potential for mergers and acquisitions to expand its product portfolio and its cheaper price-to-sales (P/S) valuation [2][15]. - AMEC's P/S valuation is based on approximately 11 times the 2025 estimated sales, reflecting the market's recognition of its semi-equipment business [15].

Summary of Key Points from the Conference Call Industry Overview - The conference focused on the semiconductor equipment industry in China, specifically companies AccoTEST, AMEC, and NAURA, during SEMICON China 2025 [1] Core Insights 1. **Competition from SiCarrier**: - Equipment makers do not perceive SiCarrier, backed by Huawei, as an immediate threat due to concerns over technology leakage among Chinese chip makers [1][2] - SiCarrier claims to have a complete product line, but cooperation with Chinese chip makers is uncertain unless it can produce qualified DUV lithography machines [2] 2. **Revenue Growth Expectations**: - Equipment manufacturers anticipate a revenue/order growth of 25%-30% year-over-year in 2025, driven by ongoing import replacement trends, which are not influenced by typical semiconductor cycles [1] 3. **In-House Component Development**: - Companies are increasingly designing or manufacturing key components internally to ensure supply security. For instance, AccoTEST is designing chips for ATE, while NAURA is producing flowmeters [1] Company-Specific Updates AccoTEST - **Order Growth**: Expected ATE order growth of over 30% year-over-year in Q1 2025, with visibility extending into Q2 2025 [3] - **New Product Confidence**: Management is optimistic about securing firm orders for the STS8600 product, which is priced approximately 20% lower than global competitors [3] - **In-House Chip Design**: The decision to design chips internally is driven by the lack of tailored offerings from major suppliers, not geopolitical issues [3] NAURA - **Revenue and Order Growth**: Projected revenue and new order growth of 25%-30% in 2025 [4] - **M&A Considerations**: Following the acquisition of a stake in Kingsemi, NAURA is considering further expansion through mergers and acquisitions [4] - **Component Production**: Plans to design and produce key components like E-Chucks and flowmeters for local peers, in addition to removing US components from its supply chain [4] AMEC - **Growth Projections**: Anticipates a 30% growth in both revenue and orders for 2025 [5] - **New Product Revenue**: The LPCVD product is expected to see a revenue increase of approximately 200% year-over-year in 2025 [5] - **Certification Process**: The 90:1 HAR etching machine is currently undergoing certification with Chinese NAND customers, which is crucial for producing advanced 3D NAND [5] Additional Insights - The semiconductor equipment market in China is characterized by a strong focus on domestic production and supply chain security, with companies actively seeking to reduce reliance on foreign technology and components [1][4][5] - The overall sentiment among the equipment makers is optimistic, with significant growth expected despite potential competitive pressures from new entrants like SiCarrier [1][2][3][4][5]