HSBC maintains its Buy rating on Hanbell Precise Machinery, with a target price of RMB38.80

Overview

This report is HSBC Qianhai's company research and earnings review of Hanbell Precise Machinery, with the core conclusion being to maintain a Buy rating. Although the company's absolute growth may not be rapid in 2026, the report believes growth visibility for 2027 and beyond is improving, driven mainly by three themes: semiconductor vacuum pumps, AIDC refrigeration compressors and industrial heat pumps.

Core views

First, the semiconductor business is expected to achieve significant growth from a low base, particularly as vacuum pump revenue is expected to double in 2026e and accelerate further in 2027 following progress in 12-inch equipment validation. Second, the market for AIDC-related magnetic-bearing and screw compressors is sufficiently large, and downstream thermal-management solution providers may seek second- and third-source suppliers beyond Danfoss, creating opportunities for the company. Third, industrial heat pump volume growth is slower than expected in the short term, but China's mandatory carbon reduction needs and the potential of Europe's large-scale heat pump market continue to support the long-term investment thesis.

Analysis framework

The report combines top-down market-sizing estimates with bottom-up business-segment analysis: AIDC compressor demand is cross-checked using data-center power capacity, PUE, the compressor share of power consumption, price per kW and penetration; semiconductor vacuum pumps are analyzed based on customer validation, domestic substitution, bundled sales through domestic equipment makers and the global semiconductor capex cycle; industrial heat pumps are assessed using data on China's central air-conditioning, data-center temperature control and industrial heat pump growth, together with European policies and installation potential. The report continues to use a DCF model for valuation.

Methodology notes

• Valuation methodsDCF discounted cash flow

  Calculates equity value based on the present value of future free cash flow and terminal value.

  The report maintains its DCF target price of RMB38.80. Key assumptions include a 9.5% WACC, 10.2% cost of equity, 4.3% after-tax cost of debt, an 11% long-term debt-to-capital ratio and a 2% terminal growth rate.

• Market sizingAIDC compressor demand estimation

  Estimates market potential based on new data-center power capacity, the compressor share of power consumption, redundancy configuration, price per unit of power and penetration.

  The report assumes 24.1GW of new global data-center capacity in 2028e, a 70% penetration rate for magnetic-bearing compressors and a value of RMB1bn per GW, resulting in an estimated global data-center magnetic-bearing compressor market of approximately RMB16.9bn in 2028e.

• Industry-chain analysisDomestic substitution and customer certification

  Assesses semiconductor vacuum pump growth through adoption by domestic equipment makers, 12-inch process validation and capacity expansion by end customers.

  The report believes the company can benefit from domestic substitution and growing demand for memory and logic chips through domestic semiconductor equipment makers including Naura, AMEC, Piotech, E-Town and Leadmicro, as well as certain wafer-fab customers.

Asset mapping & comparison

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

• Hanbell Precise Machinery / 002158.SZ

  Covered stock, rated Buy.

  Strengths

  Offers three growth exposures: domestic substitution of semiconductor vacuum pumps, AIDC compressors and industrial heat pumps; the DCF target price implies 44.4% upside.

  Weaknesses

  Absolute growth is limited in 2026, and some new products remain in downstream customer certification and testing; near-term industrial heat pump demand is being released more slowly than expected.

  Comparison

  The report states that the share price has performed in line with Chinese domestic semiconductor equipment companies over the past three months. The semiconductor vacuum pump market remains dominated by foreign brands such as Edwards, Ebara and Kashiyama, with SKY technology being one of the domestic comparable companies.

  Risks

  Data-center and industrial heat pump growth below expectations, rising raw-material costs, intensified compressor competition, weaker-than-expected Chinese compressor demand, weaker-than-expected vacuum pump demand, and foreign-exchange and tariff uncertainty in overseas operations.

• SKY technology / 920186 CH

  Comparable company for semiconductor vacuum pumps, used by the report as an industry reference; not rated.

  Strengths

  Has become one of China's leading domestic semiconductor vacuum pump suppliers, providing a positive reference for the domestic substitution trend following its listing.

  Weaknesses

  The report cites its investor materials as stating that certain high-demand process steps at some advanced manufacturing nodes have not yet completed testing and validation.

  Comparison

  Competes with Hanbell in the domestic substitution of semiconductor vacuum pumps, but the report primarily covers Hanbell.

  Risks

  Uncertainty remains regarding advanced-process validation progress, the pace of domestic substitution and market competition.

Key data

• Target priceRMB38.80Unchanged, based on the DCF model.
• Current share priceCNY26.87Share price disclosed on the report's cover, implying 44.4% upside to the target price.
• 2026e PE23.8xThe report states that the stock trades at 23.8x 2026e P/E.
• 2027e PE17.6xLower than 2026e, reflecting expected earnings growth.
• 2025-2028e earnings CAGR34.9%The report forecasts compound earnings growth from 2025 to 2028.
• Semiconductor vacuum pump revenue forecast2025e RMB100m; 2026e RMB202mThe report believes this business had been relatively stagnant since 2021 and will begin significant growth in 2026e.
• Global data-center magnetic-bearing compressor market2028e RMB16.9bnBased on assumptions of global new data-center capacity, 70% penetration and a value of RMB1bn/GW.
• China 1H26 data-center temperature-control air-conditioning growth+13.6% y-o-yThe report believes this demand partially offset the decline in central air conditioning.
• China 1H26 industrial heat pump growth+15.5% y-o-yBelow the report's previous expectations, but still supportive of the long-term thesis.
• Annualized potential market for industrial heat pumps in EuropeEUR5.4bnBased on EHPA's estimate of 3.6GW of annual installations and a price of EUR1.5bn/GW.

Impact & implications

For investment judgment, the report views recent share-price volatility as linked to China's semiconductor equipment sector rather than as a deterioration in the company's long-term growth thesis. If semiconductor vacuum pump certification progresses, AIDC compressor suppliers become more diversified, and industrial heat pump policies or demand improve as expected, the company's valuation could be supported by earnings upgrades and a thematic premium.

Risks

• China's industrial heat pump demand or global data-center demand growth may be weaker than expected, potentially weighing on earnings forecasts.
• Raw-material cost increases may be stronger than expected, potentially putting pressure on margins.
• Compressor market competition may be stronger than expected, particularly as new entrants increase in the energy-storage thermal-management segment.
• Chinese compressor demand may be weaker than expected, affecting refrigeration compressor and air compressor revenue.
• Vacuum pump demand growth may be weaker than expected, affecting sales related to solar silicon wafers, battery manufacturing and semiconductor manufacturing.
• Overseas operations face foreign-exchange volatility and additional tariff risks.

What to watch

• Whether more favorable policies for industrial heat pumps are introduced.
• Whether China's industrial heat pump demand data improves.
• AIDC compressor sales and customer certification progress.
• Whether quarterly earnings recover.
• Validation and volume-production progress for semiconductor vacuum pumps among 12-inch equipment, memory and logic-chip customers.
• Policy support for large-scale industrial heat pumps in Europe and Hanbell's potential ability to capture market share.