Goldman Sachs maintains a Buy rating on AMEC and raises the 12-month target price to Rmb538

Overview

This is a Goldman Sachs company research report on AMEC (688012.SS). The core conclusion is to maintain a Buy rating and raise the 12-month target price to Rmb538. The main themes are semiconductor equipment portfolio expansion, upgrades to high-end tools, generative AI driving advanced-node demand, and the resulting modest upward revisions to 2027E/2028E earnings estimates.

Core views

Goldman Sachs believes AMEC is expanding from strength in etching equipment into a more complete semiconductor equipment platform. The company already has broad coverage in etching and inspection/metrology tools, while accelerating its footprint in deposition and wet process equipment. Demand from advanced logic, GAA, 3D NAND, DRAM and other applications for high-precision etching and advanced process tools should enable AMEC to benefit from domestic customers' advanced-node capacity expansion.

Analysis framework

The report analyzes product-mix upgrades, advanced-node demand, earnings forecast revisions, and discounted P/E valuation. On the earnings side, the focus is on revenue growth, gross margin, expense ratio, operating margin, and net income; on the valuation side, the target multiple is derived from the correlation between global peers' P/E and EPS growth, then discounted to the target valuation date.

Methodology notes

• Valuation methodsDiscounted P/E valuation

  Uses a 39.6x 2030E P/E as the target multiple and discounts it back to 2027E using an 11% cost of equity.

  The target multiple comes from the correlation between global peers' 2027E P/E and 2027-2028E net income growth; Goldman Sachs uses this to derive the Rmb538 12-month target price.

• factor analysisGS Factor Profile

  Compares a stock's relative attributes through growth, financial returns, valuation multiples, and composite factors.

  This framework calculates percentiles using metrics such as forward sales, EBITDA, EPS, ROE, ROCE, CROCI, and valuation multiples, providing a stock's relative context versus the market and industry peers.

• M&A scenarioM&A Rank

  Goldman Sachs assesses the likelihood of a company becoming an acquisition target on a 1-to-3 scale.

  The report discloses that AMEC's M&A Rank is 3, meaning M&A factors are viewed as unimportant and are typically not included in the target price.

Asset mapping & comparison

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

• AMEC (688012.SS)

  The report coverage target, with a maintained Buy rating.

  Strengths

  One of the leading domestic semiconductor equipment vendors, with broad etching tool coverage, an expanding product line into deposition, wet process, and metrology, and direct benefit from advanced-node and AI-related demand.

  Weaknesses

  Valuation is relatively high and is sensitive to the pace of advanced-node demand, customer capacity expansion, and product ramp-up.

  Comparison

  The target multiple is benchmarked against global peers' P/E and EPS-growth correlation, emphasizing long-term EPS growth as support for valuation.

  Risks

  Widening trade restrictions, disruption to advanced-node equipment supply, and capital expenditure from major domestic foundries coming in below expectations.

Key data

• 12-month target priceRmb538Previously Rmb471, still based on the discounted P/E method.
• Current priceRmb432.90This implies about 24.3% upside to the target price.
• 2027E earnings forecast revisionNet profit raised by 2%Mainly due to higher revenue and lower expense ratios.
• 2028E earnings forecast revisionNet profit raised by 2%Driven by advanced-node demand and an upgraded high-end tool mix.
• 2026E revenue forecastRmb16,931mnThe chart shows 37% year-on-year growth.
• 2027E revenue forecastRmb22,325mnRaised by about 1% from the previous estimate of Rmb22,031mn.
• 2028E revenue forecastRmb27,641mnRaised by about 1% from the previous estimate of Rmb27,341mn.
• 2026E net profit forecastRmb4,058mnThe chart shows 92% year-on-year growth.
• 2027E net profit forecastRmb5,814mnRaised by 2% from the previous estimate of Rmb5,698mn.
• 2028E net profit forecastRmb7,532mnRaised by 2% from the previous estimate of Rmb7,416mn.
• Target valuation multiple39.6x 2030E P/EDiscounted back to 2027E using an 11% COE.
• Etching application coverageMore than 95% of roughly 300 etching applicationsIncludes CCP and ICP etching tools and extends to high-aspect-ratio etching.

Impact & implications

If generative AI drives capacity expansion in China's domestic advanced nodes, AMEC, as a leading domestic semiconductor equipment supplier, could gain greater share in etching, deposition, wet process, and metrology tools. A richer product mix and scale effects are likely to improve operating margins and support a higher valuation multiple.

Risks

• If trade restrictions expand from advanced nodes to mature nodes, AMEC's product demand could be further pressured.
• If AMEC's ability to supply etching equipment for overseas 5nm and other advanced-node production lines is disrupted, downside risk could emerge.
• Capital expenditure from major Chinese foundries coming in below expectations would affect semiconductor equipment orders and revenue growth.
• Earnings forecasts and the target price rely on advanced-node demand, product-mix upgrades, and expense-ratio improvements; if these fall short of expectations, valuation support may weaken.

What to watch

• The pace of advanced-node capacity expansion related to generative AI.
• Customer validation and ramp-up progress for new ICP etching tools such as Primo Angnova.
• The revenue ramp speed of the more than 40 deposition equipment product types.
• The acquisition of Hangzhou Sizonetech and progress on synergies within the 12-inch CMP platform.
• Whether revenue, operating margin, and net profit from 2026E to 2028E meet Goldman Sachs' forecasts.
• Changes in capital expenditure by major Chinese foundries and marginal policy shifts on trade restrictions.