Goldman Sachs maintains Buy on AMEC, with volume ramp of advanced etching tools driving long-term growth

Overview

This report is Goldman Sachs' review of AMEC's (688012.SS) 1Q26 results. The company maintained strong quarterly revenue growth, but revenue and operating profit came in below Goldman Sachs and market expectations; net profit significantly exceeded expectations due to non-operating investment gains. The report highlights capacity and shipment ramp-up of advanced etching equipment, especially high-end etching tools for advanced memory customers, mass production of high aspect ratio products, and validation and R&D progress of CCP and ICP etchers in more advanced applications.

Core views

Goldman Sachs maintains a Buy rating, believing that AMEC's long-term growth continues to be supported by demand for etching equipment from advanced logic and memory customers. Although 1Q26 revenue came in below expectations and higher-than-expected R&D spending weighed on operating profit, net profit was strong, and progress in the advanced etching product line improved visibility on future revenue. Goldman Sachs raised its 2026-2028E earnings forecasts and increased the target price from Rmb462 to Rmb471.

Analysis framework

The report uses an earnings snapshot, earnings forecast revisions, segment revenue forecasts, P&L forecasts, and a discounted P/E valuation framework for analysis. On earnings, it compares actual results with Goldman Sachs forecasts, Bloomberg consensus, QoQ changes, and YoY changes; on valuation, it uses a target 2029E P/E of 43.8x and discounts it back to 2026E at an 11% cost of equity to derive the 12-month target price.

Methodology notes

• Valuation methodsDiscounted P/E valuation

  Determine the target multiple based on long-term EPS growth and the correlation between global peers' P/E and EPS growth, then discount it back to the current valuation period.

  Goldman Sachs uses 43.8x 2029E P/E as the target multiple and discounts it back to 2026E at an 11% COE to derive the 12-month target price of Rmb471.

• financial_forecastEarnings forecast revision

  Incorporate 1Q26 actual results and changes in product demand into the 2026-2028E model.

  Goldman Sachs raised its 2026E, 2027E, and 2028E net profit forecasts by 4%, 2%, and 2%, respectively; 2026E is mainly driven by investment gains, while 2027-2028E are mainly supported by higher etching tool revenue from advanced logic and memory customers as well as non-operating gains.

• risk_profileGS Factor Profile

  Compare a stock's position versus the market and industry peers using growth, financial returns, valuation multiples, and composite indicators.

  This framework supplements stock investment characteristic analysis, with indicators including forward revenue, EBITDA, EPS growth, ROE, ROCE, CROCI, as well as valuation metrics such as P/E, P/B, and EV/EBITDA.

• corporate_eventM&A Rank

  Assess the likelihood of a company becoming an M&A target.

  The report discloses that AMEC's M&A Rank is 3, representing a low probability and typically not contributing to the target price.

Asset mapping & comparison

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

• 688012.SS

  Covered name; Goldman Sachs maintains Buy rating

  Strengths

  High-end etching tools for advanced memory customers are ramping shipments, and high aspect ratio products have entered mass production; 2026-2028E net profit forecasts were raised; long-term revenue and EPS growth expectations are strong.

  Weaknesses

  1Q26 revenue was below Goldman Sachs' forecast and market consensus; higher-than-expected R&D spending weighed on operating profit; 1Q26 gross margin was below Goldman Sachs' forecast.

  Comparison

  Valuation uses the correlation between global peers' P/E and EPS growth to derive a target 2029E P/E of 43.8x; the company is in the Greater China Technology coverage universe and is compared with companies such as AAC, ACM Research, ASMPT, NAURA, and SMIC.

  Risks

  Expanded trade restrictions, disruptions to supply of advanced-node products, and weaker-than-expected capex from major Chinese wafer fabs.

Key data

• 1Q26 revenueRmb2.915bnUp 34% YoY and down 33% QoQ, 12% below Goldman Sachs' forecast and 7% below Bloomberg consensus.
• 1Q26 net profitRmb930mUp 197% YoY, 22% above Goldman Sachs' forecast and 29% above Bloomberg consensus.
• 1Q26 gross margin39.9%Higher than 39.3% in 4Q25, but below Goldman Sachs' forecast of 42.2%.
• 1Q26 operating margin13.4%Below Goldman Sachs' forecast of 22.1%, mainly due to higher-than-expected R&D investment in new products.
• 2026E revenue forecastRmb16.931bnDown 2% versus the previous forecast.
• 2026E net profit forecastRmb4.058bnUp 4% versus the previous forecast.
• 2027E net profit forecastRmb5.698bnUp 2% versus the previous forecast.
• 2028E net profit forecastRmb7.416bnUp 2% versus the previous forecast.
• 12-month target priceRmb471Previous target price was Rmb462; the target price implies 33.8% upside.
• Target P/E43.8x 2029E P/EBased on the correlation between global peers' P/E and EPS growth, and discounted back to 2026E at an 11% COE.
• Current priceRmb352.01Current price disclosed in the report table.

Impact & implications

The report has a positive investment implication for AMEC: in the short term, 1Q26 revenue and operating profit missing expectations reflect quarterly volatility and pressure from R&D spending; however, net profit beating expectations, upgraded earnings forecasts, and a higher target price show that Goldman Sachs places greater weight on the volume ramp of advanced etching equipment and long-term EPS growth. If demand from advanced memory and advanced logic customers continues to materialize, the company's revenue mix and profit margins could improve.

Risks

• Current trade restrictions are not clearly targeted at mature-node wafer fabs, but if restrictions expand to mature nodes, demand for AMEC's products could weaken further.
• AMEC supplies etching equipment that can be used in overseas 5nm production lines; if the company's ability to supply related products is disrupted, it would create downside risk.
• Weaker-than-expected capex from major Chinese wafer fabs could affect semiconductor equipment orders and revenue realization.
• Higher-than-expected R&D spending on new products may continue to pressure operating margins.
• Part of the net profit beat came from investment gains from the sale of Piotech shares, and the sustainability of non-operating gains is lower than that of core business profits.

What to watch

• The shipment ramp speed of high-end etching tools for advanced memory customers.
• Progress in mass production of high aspect ratio products and customer adoption.
• Customer validation results for the CCP etcher supporting a 90:1 aspect ratio.
• R&D progress of the second-generation ICP etcher for 3D DRAM applications.
• Changes in capex and order cadence at major Chinese wafer fabs.
• Whether revenue recovery in 2H26, gross margin improvement, and lower operating expense ratio can materialize.