AMEC's second-quarter results were broadly in line with guidance, while advanced-node capex is expected to drive stronger orders in the second half

Overview

The report reviews AMEC's 2Q26 results and earnings call takeaways. Revenue and net profit were broadly in line with guidance, but R&D investment caused operating profit to fall below market expectations. Goldman Sachs places greater emphasis on 2H26E order growth, progress in high-end equipment, capacity expansion, and long-term advanced-node demand, and therefore slightly raises its earnings forecasts and target price while maintaining its Buy rating.

Core views

AMEC's 2Q26 revenue and net profit were approximately Rmb3.8bn and Rmb1.87bn, broadly in line with expectations based on the midpoint of company guidance. The results were supported by advanced logic and memory capex from customers as well as higher investment income. However, operating profit was 21% below Goldman Sachs' forecast and 29% below Bloomberg consensus, mainly because R&D expenses were higher than expected. Goldman Sachs believes this will pressure margins in the short term, but that R&D investment supports product development and is positive for long-term growth. Orders are the report's most important forward-looking indicator. Management is optimistic that the generative AI trend will drive higher global wafer fabrication equipment spending and expects AMEC to achieve solid order growth in 2H26E, supported by strong customer demand and the company's expansion into high-end equipment. Goldman Sachs further believes that generative AI will prompt Chinese customers to increase demand for advanced-node manufacturing, and that AMEC, as a leading domestic semiconductor production equipment supplier with an advanced product portfolio, is positioned to benefit. On the product front, AMEC is expanding from etching and deposition equipment into broader semiconductor production equipment platform solutions encompassing CMP, metrology, advanced packaging, and other areas to capture incremental customer demand. The company is also one of the earlier entrants in high-aspect-ratio etching, with innovative technologies and accumulated experience. It is currently collaborating with multiple customers to develop next-generation 90:1 high-aspect-ratio etching equipment, which management expects to ramp gradually in 2027E. This product progress represents a medium-term growth pillar in addition to order growth. The company is also expanding manufacturing capacity to meet demand. Phase I of its Shanghai Lingang facility has commenced mass production, while Phase II is in the planning stage. Capacity expansion is also progressing at its Nanchang, Guangzhou, and Chengdu facilities. Meanwhile, management noted recent pressure on semiconductor production equipment components. The company is working closely with overseas and local suppliers to ensure equipment deliveries, meaning supply-chain execution will continue to affect the pace at which orders convert into revenue. After incorporating the 2Q26 results, Goldman Sachs raises its 2026-28E earnings forecasts for AMEC by 0.8%, 0.4%, and 1.1%, respectively. The adjustments mainly reflect higher advanced equipment revenue expectations, driven by solid spending from advanced logic and memory customers and the company's product expansion; gross margin forecasts remain broadly unchanged. To reflect increased product R&D investment, Goldman Sachs raises its 2026/27E operating expense ratio forecasts by 0.2 to 0.5 percentage points, while also increasing its non-operating income forecasts due to higher-than-expected investment income. On valuation, Goldman Sachs slightly raises its 12-month target price from Rmb576 to Rmb577 and maintains its Buy rating. The target price continues to use a discounted P/E methodology, applying a target multiple of 56x 2030E P/E and discounting it to 2027E at an 11% cost of equity; the target multiple is unchanged. The 56x multiple is based on the relationship between global peers' 2027E P/E ratios and 2027-28E year-on-year net profit growth, and is supported by AMEC's higher earnings growth as well as prospects for sector valuation re-rating driven by semiconductor capacity expansion and advanced-node upgrades. The report also uses the relationship between peers' P/E ratios, net profit growth, and operating margins to determine the target P/E.

Analysis framework

The report first compares 2Q26 revenue, net profit, and operating profit with company guidance, Goldman Sachs' forecasts, and Bloomberg consensus estimates. It then combines earnings call information to assess orders, customer capex, advanced equipment R&D, capacity, and the supply chain. These changes are subsequently incorporated into the 2026-28E earnings forecasts, while the target P/E is determined through the relationship between global peer growth and valuation. Finally, the 12-month target price is derived by discounting at the cost of equity.

Methodology notes

• Valuation MethodologyPE/PEG valuation

  Discounted P/E Valuation

  The report applies a target multiple of 56x 2030E P/E and discounts it to 2027E at an 11% cost of equity to derive a 12-month target price of Rmb577. The target multiple references the correlation between global peers' P/E ratios and earnings growth.

• Industry/Sector Analysis FrameworkSupply-demand framework

  Transmission from Capex to Equipment Demand and Orders

  Starting from demand for generative AI and advanced-node manufacturing, the report concludes that capex by memory and logic customers will drive wafer fabrication equipment demand, which will in turn translate into AMEC's orders, equipment revenue, and capacity expansion.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• AMEC (688012.SS)

  Advanced logic and memory capex, generative AI demand, high-end equipment expansion, and demand for domestically produced semiconductor equipment are the main channels of benefit described in the report.

  Strengths

  A leading domestic semiconductor production equipment supplier, an early entrant in high-aspect-ratio etching, and expanding from etching and deposition equipment into more comprehensive platform solutions.

  Weaknesses

  2Q26 operating profit was below Goldman Sachs' and Bloomberg consensus estimates, while higher R&D investment and recent component pressure may affect near-term profit and deliveries.

  Comparison

  The target P/E is determined based on the correlation between global peers' P/E ratios and earnings growth. The report believes AMEC's higher earnings growth supports its 56x 2030E P/E.

  Risks

  Expansion of trade restrictions to mature nodes, impediments to the supply capability of advanced-node equipment, and weaker-than-expected capex by major Chinese fabs.

Key data

• 2Q26 RevenueRmb3.8bnBroadly in line with expectations based on the midpoint of company guidance
• 2Q26 Net ProfitRmb1.87bnBroadly in line with expectations based on the midpoint of company guidance and supported by investment income
• 2Q26 Operating Profit Variance21% below Goldman Sachs' forecast; 29% below Bloomberg consensusMainly due to higher-than-expected R&D expenses
• 2026-28E Earnings Forecast Adjustments+0.8% / +0.4% / +1.1%Corresponding to 2026E, 2027E, and 2028E, respectively
• 2026/27E Operating Expense Ratio AdjustmentsRaised by 0.2 to 0.5 percentage pointsReflecting higher R&D investment required for product development
• High-Aspect-Ratio Etching Equipment90:1Next-generation product being advanced in collaboration with multiple customers, with a gradual ramp expected in 2027E
• 12-Month Target PriceRmb577Previously Rmb576
• Target Valuation Multiple56x 2030E P/EMultiple unchanged and discounted to 2027E
• Cost of Equity11%Used to discount the target P/E to 2027E; assumption unchanged

Impact & implications

The report believes that AMEC's near-term profit is affected by R&D expenses and component supply pressure, but that R&D, product platform expansion, and capacity construction are laying the foundation for medium- to long-term growth. If advanced logic and memory capex remains sustained and the 90:1 etching equipment ramps as planned, the company's orders and advanced equipment revenue are expected to grow. Goldman Sachs therefore raises its earnings forecasts and maintains its Buy rating.

Risks

• If current trade restrictions expand to mature-node fabs, demand for AMEC's products may decline further.
• AMEC's etching equipment can be used in overseas advanced-node production lines such as 5nm. If the ability to supply such products is impeded, this could create additional downside risk.
• If capex by major Chinese fabs is weaker than expected, equipment demand and order growth may come under pressure.

What to watch

• Monitor whether 2H26E orders achieve solid growth in line with management's expectations.
• Monitor customer validation of the next-generation 90:1 high-aspect-ratio etching equipment and progress toward a gradual ramp in 2027E.
• Monitor capacity expansion progress for Shanghai Lingang Phase II and the Nanchang, Guangzhou, and Chengdu facilities.
• Monitor component supply pressure and the company's execution in ensuring equipment deliveries.
• Monitor the sustainability of capex by advanced logic and memory customers.