Piotech 1Q26 revenue beat expectations, but net profit improvement mainly came from gains from changes in the fair value of financial assets

Overview

This report reviews Piotech's 1Q26 results. The company's revenue, gross profit, operating profit, and reported net profit were all significantly better than the same period last year, showing a recovery from the revenue line to the profit line. However, the report emphasizes that the sharp increase in net profit mainly came from gains from changes in the fair value of financial assets; excluding this item, core earnings performance was roughly in line with to slightly below expectations.

Core views

Bernstein believes Piotech has returned to a high revenue growth trajectory, with the R&D expense ratio falling from 22.38% in 1Q25 to 16.88% in 1Q26, which should help significantly improve net margin in 2026. Deposition equipment remains the core business, driven by increasing 3D NAND stack layers and demand for thin-film processes such as ONON stacking and OPN/SiB hard masks; meanwhile, ALD and PECVD continue to make progress among logic and memory customers. Hybrid bonding equipment for advanced packaging forms the second growth curve, and the company already covers W2W, D2W, as well as related pre-treatment and metrology equipment.

Analysis framework

The report adopts an analytical framework combining earnings comparison, profit decomposition, product progress, and valuation multiples: it first compares actual 1Q26 revenue, gross margin, operating profit, net profit attributable to parent, and net profit excluding non-recurring items with 1Q25, 4Q25, and Bernstein's expectations, then identifies the contribution of fair-value gains to net profit, and finally derives the target price based on 2027 EPS forecasts and the Price to EPS multiple.

Methodology notes

• Earnings analysisQuarterly earnings comparison

  Comparison of actual results with YoY, QoQ, and expectation variances

  The report compares 1Q26 revenue, gross profit, operating profit, net profit, net profit excluding non-recurring items, and EPS with 4Q25, 1Q25, and Bernstein forecasts to distinguish revenue recovery, margin improvement, and the impact of one-off gains.

• Earnings quality analysisExclusion of non-recurring gains and losses

  Core profitability excluding fair-value gains

  The report specifically notes that RMB 473mn in fair-value gains significantly boosted reported net profit, so net profit attributable to parent excluding non-recurring items is used to assess the true quality of operating earnings.

• Valuation methodsPrice to EPS multiple

  Target price based on 2027 EPS and a 48x P/E multiple

  Bernstein uses 2027 EPS of CNY 9.43 and a 48x Price to EPS multiple to derive the CNY 450 target price.

Asset mapping & comparison

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

• Piotech Inc / 688072.SS / 688072.CH

  Covered target

  Strengths

  Revenue has returned to high growth; deposition equipment has a high share among memory customers; ALD and PECVD continue to gain customer traction; the hybrid bonding product line covers W2W, D2W, pre-treatment, and metrology equipment; benefits from domestic substitution in China's semiconductor equipment market.

  Weaknesses

  Reported 1Q26 net profit relied heavily on RMB 473mn in fair-value gains; net profit attributable to parent excluding non-recurring items was below expectations; customer concentration and the capital expenditure cycle may affect order stability.

  Comparison

  1Q26 revenue grew 57% YoY, and gross margin and operating margin improved significantly versus 1Q25; however, net margin excluding non-recurring items was 9.2%, below 11.5% in 4Q25.

  Risks

  Loss of orders from key customers, capital expenditure by Chinese wafer fabs coming in below expectations, and slower-than-expected adoption of domestic equipment.

• China's domestic substitution chain for semiconductor equipment

  Thematic exposure

  Strengths

  Piotech has a track record of product innovation in deposition equipment and advanced packaging equipment, and is expected to benefit from domestic substitution and share gains in China's WFE market.

  Weaknesses

  The pace of domestic substitution depends on process validation, capacity bottlenecks, and customer capital expenditure.

  Comparison

  The report does not provide itemized comparisons with specific peers, but positions Piotech as a rapidly rising domestic WFE supplier.

  Risks

  Technical challenges, delays in process validation, and capacity bottlenecks among domestic equipment manufacturers.

Key data

• 1Q26 revenueRMB 1.112bnUp 57% YoY and 3.9% above Bernstein's expectation.
• 1Q26 net profit attributable to parentRMB 571mnA significant turnaround from a RMB 147mn loss in 1Q25, but included RMB 473mn in fair-value gains.
• 1Q26 net profit attributable to parent excluding non-recurring itemsRMB 102mnBelow Bernstein's expectation of RMB 147mn.
• 1Q26 R&D investmentRMB 188mnUp 18.39% YoY; R&D expense ratio was 16.88%, below 22.38% in 1Q25.
• 1Q26 gross margin41.7%Above 19.9% in 1Q25 and 38.0% in 4Q25.
• Target priceCNY 450.00Based on 2027 EPS of CNY 9.43 and a 48x Price to EPS multiple.
• Current priceCNY 423.50As of 2026-04-28, implying about 6% upside.

Impact & implications

The core investment implication is that Piotech's revenue growth and product-line expansion still support the Outperform view, but short-term net profit quality needs to be interpreted cautiously. If investors focus only on the reported net margin, they may overestimate the extent of improvement in operating profitability; the more important point to track is whether margin excluding non-recurring items can continue to improve alongside revenue scale, normalization of the R&D expense ratio, and ramp-up in domestic substitution orders.

Risks

• Unexpected loss of orders from key customers due to overreliance on a small number of major clients.
• Capital expenditure by Chinese wafer fabs fails to meet expected targets.
• Technical difficulties in certain manufacturing processes or capacity bottlenecks among domestic equipment makers may cause the localization progress of domestic equipment to be slower than expected.
• Reported net profit is heavily affected by fair-value gains; if operating profits are not realized subsequently, earnings quality may fall short of market expectations.

What to watch

• Whether net profit attributable to parent excluding non-recurring items and recurring net margin continue to improve.
• Orders and repeat purchases of deposition equipment such as PECVD and ALD from 3D NAND, DRAM, and logic customers.
• Commercialization progress and customer expansion for hybrid bonding-related equipment such as Dione 300, Propus 300, and Pleione 300.
• Whether the R&D expense ratio continues to normalize, and whether expanding revenue scale can bring operating leverage.
• Capital expenditure by Chinese wafer fabs and the pace of domestic substitution in WFE.