Leading Chinese Semiconductor Stocks See Accelerating Order Growth; Target Prices Raised, Maintaining 'Outperform' Rating

Overview

This report discusses the performance and outlook of China's semiconductor equipment companies in the first quarter of 2026, focusing on order growth and profitability changes at NAURA, AMEC, and Piotech. The report believes that with rising local demand and a recovering memory cycle, order growth will accelerate, and it has raised the target prices for these three companies while maintaining an 'Outperform' rating.

Core views

The report points out that order growth in China's semiconductor equipment industry in 2026 is expected to rise from around 30% in 2025 to over 40%, mainly benefiting from the recovery of the memory cycle and growing demand for logic chips. Demand Side: - DRAM growth is particularly significant, with new capacity expected to nearly double. - Although visibility for NAND in the second half is lower, first-half orders have already approached last year's full-year level. - Advanced logic chip orders are expected to grow by more than 25%, partly driven by AI-related local demand. Supply Side: - Japanese manufacturers benefit greatly from DRAM capacity expansion due to their high market share. - Local tool manufacturers are gradually replacing U.S. products thanks to cost-effectiveness advantages. Stock Analysis: - NAURA: As the domestic WFE leader, covering multiple product lines, it is expected to benefit long-term from the localization trend. - AMEC: Technologically advanced, with rapid expansion in dry etching business. - Piotech: Highly efficient in R&D investment, expected to see a significant improvement in net profit margin in the coming quarters. Valuation Level: - Based on 2027 EPS, the report values the three companies at P/E ratios of 40x, 70x, and 48x for NAURA, AMEC, and Piotech respectively.

Analysis framework

The report uses a supply-and-demand framework to analyze growth drivers in China's semiconductor equipment industry, combined with company financial data to assess profitability and order trends. 1. Industry Supply-and-Demand Analysis: Through conversations with management and market research, the report predicts that order growth in 2026 will accelerate to over 40%, driven primarily by the recovery of the memory cycle and demand for logic chips. 2. Company Financial Analysis: By comparing gross margins, net profit margins, and R&D spending ratios among companies, the report evaluates differences in profitability. 3. Valuation Method: Based on 2027 expected EPS, the PE valuation method is used to set target prices for the three companies. 4. Risk Assessment: Consideration is given to downside risks in the LED and photovoltaic industries, unmet capital expenditure targets, and the possibility of a slowdown in the localization process.

Methodology notes

• Industry/Industrial Analysis FrameworkSupply-and-Demand Framework

  Analyzing the growth potential of the semiconductor equipment industry through supply-and-demand relationships.

  The report forecasts accelerated order growth in 2026 using the supply-and-demand framework, mainly driven by the recovery of the memory cycle and growth in logic chip demand.

• Valuation MethodPE Valuation

  Using 2027 expected EPS and target PE multiples to value companies.

  The report calculates target prices based on 2027 EPS and different PE multiples, reflecting expectations for future profitability.

• Company Fundamentals and Financial FrameworkThree-Statement Reconciliation

  Analyzing revenue, cost, and expense structures to evaluate company profitability.

  The report assesses each company's competitiveness and profit potential by analyzing gross margins, net profit margins, and R&D expense ratios.

Asset mapping & comparison

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

• NAURA (002371.SS)

  As the domestic WFE leader, covering multiple product lines, it is expected to benefit long-term from the localization trend.

  Strengths

  Wide product portfolio, diversified customer base.

  Weaknesses

  Recent profitability under pressure; need to focus on controlling R&D spending.

  Comparison

  Compared to AMEC and Piotech, NAURA has a lower valuation but slightly weaker growth potential.

  Risks

  Downside risk from LED and photovoltaic industries; unmet capital expenditure targets.

• AMEC (688012.CH)

  Technologically advanced dry etching equipment supplier, rapidly expanding its deposition business.

  Strengths

  Strong technological capabilities, high global recognition.

  Comparison

  Compared to NAURA and Piotech, AMEC has a higher valuation but stronger growth potential.

  Risks

  WFE demand below expectations; slowdown in localization process.

• Piotech (688072.CH)

  Emerging manufacturer specializing in deposition equipment, highly efficient in R&D.

  Strengths

  Potential for improved profit margins from capitalized R&D expenditures.

  Comparison

  Compared to NAURA and AMEC, Piotech has a moderate valuation but may experience greater short-term earnings volatility.

  Risks

  R&D progress falling short of expectations; intensifying market competition.

Key data

• Order Growth Rate40%+Expected to grow year-on-year in 2026, accelerating from 30% in 2025.
• DRAM New CapacityNearly DoubledNew DRAM capacity is expected to increase significantly in 2026.
• NAND First-Half OrdersClose to Last Year's Full-Year LevelFirst-half 2026 orders have already approached last year's full-year level.
• Advanced Logic Chip Order Growth25%+Under conservative assumptions, growth is expected to exceed 25%.

Impact & implications

The report believes that with continued growth in local demand and the recovery of the memory cycle, NAURA, AMEC, and Piotech will continue to benefit. Investors should pay attention to upcoming catalysts such as IPOs and new plant startups, while also watching for investment opportunities arising from diverging profitability.

Risks

• A downturn in the LED and photovoltaic industries could affect NAURA's non-wafer fab equipment business.
• Capital expenditure by Chinese wafer fabs falls short of expectations.
• The localization process slows down due to technical difficulties or capacity bottlenecks.

What to watch

• Progress of memory manufacturers' IPOs (such as CXMT and YMTC).
• New plant startup plans (such as DRAM factories in Beijing and Hefei).
• Impact of R&D spending on profit margins.