Summary of Hwatsing (688120.SS) Conference Call Company Overview - **Company**: Hwatsing (688120.SS) - **Industry**: Semiconductor Equipment Key Financial Performance - **2Q25 Revenue**: Rmb1.0 billion, representing a **27% YoY** and **14% QoQ** growth, in line with Goldman Sachs estimates [1][4] - **Contract Liabilities**: Increased to **Rmb1.8 billion** in 2Q25, indicating a solid order uptrend [2][4] - **Net Income**: Rmb272 million, reflecting an **18% YoY** and **17% QoQ** increase, consistent with estimates [4][10] - **Gross Margin**: Declined to **45.8%**, slightly below the expected **46.7%** [4][10] - **Operating Income**: Rmb290 million, up **56% YoY** and **11% QoQ** [4][10] Market and Product Insights - **Semiconductor Capex**: Positive outlook due to increasing semiconductor capital expenditures in China, particularly driven by AI chip demand [1] - **Product Expansion**: Diversification into thinning, dicing, polishing, and cleaning tools, with notable growth in the **12'' wafer thinning tool** and **Ion implantation tools** [1][11] - **Future Demand**: Anticipated increase in demand for advanced chip packaging technologies, which will require more CMP and related equipment [1] Valuation and Ratings - **Current P/E Ratio**: Trading at **28x** 2026E P/E, with a target multiple of **32x** based on peer comparisons [1][15] - **Price Target**: Raised by **10%** to **Rmb148.0**, indicating a potential upside of **22.8%** from the current price of **Rmb120.50** [15][24] - **Investment Rating**: Maintained at **Neutral** due to limited upside compared to other semiconductor companies [1][15] Earnings Revisions - **Net Income Estimates**: Revised up by **0%/1%/+2%** for 2025E-27E, reflecting a better product mix [12] - **EPS Revisions**: Adjusted down by **-2%/-1%/0%** for 2025E-27E due to an increase in share count [12] Risks and Considerations - **Key Risks**: Variability in semiconductor capex expansion, order gains from clients, and the pace of new product introductions [22] Additional Insights - **Operational Efficiency**: Operating expenses remained flat at **17.9%** of revenue, contributing to improved operating income [4][10] - **Long-term Potential**: Despite current valuation concerns, the long-term growth potential remains strong due to market trends and product innovations [1][15]