NAURA 1Q26 Net Margin Again Below Expectations, but Bernstein Sees Buy-on-Weakness Amid Order Growth Main Theme

Overview

Bernstein released NAURA 1Q26 earnings review. Report indicates company 1Q26 revenue RMB10.3bn, +26% YoY, slightly below consensus; gross margin recovered from 37% in 4Q25 to ~41%, inline with expectations; net margin rebounded from 2% in 4Q25 to 16%, but still 164bps below consensus. Although short-term stock price may face pressure due to earnings miss, report considers this a buy-on-weakness opportunity as 2026 order growth and localization improvement will become more important trading themes.

Core views

Core views include: First, revenue recognition cycle remains approx one year, 1Q26 revenue roughly corresponds to 1Q25 order levels, while 1Q26 order growth speed expected significantly faster than current revenue growth; Second, profitability below expectation mainly driven by personnel expansion, rising SG&A & R&D expense ratios, considered investment for future growth, some pressure already priced by market; Third, with China memory and logic customers actively expanding capacity, domestic equipment manufacturers' 2026 new order growth may re-accelerate to 50%+, providing positive support for NAURA; Fourth, 1Q26 performance may reset weak profitability expectations, subsequent investors or re-focus on strong order growth.

Analysis framework

Report compares 1Q26 actual results against 4Q25, 1Q25, Bernstein forecasts, and market consensus, focusing on breaking down revenue, gross margin, operating profit margin, net margin, expense ratio, inventory, contract liabilities, EPS, valuation multiples, and stock price performance, combining short-term earnings pressure with 2026 order growth and localization trends to assess investment implications.

Methodology notes

• Valuation methodsP/E Multiple Valuation

  Target price derived by multiplying 2027E EPS by target P/E multiple.

  Report uses 48x 2027E EPS valuation, based on 2027 EPS RMB13.31, deriving CNY650 target price.

• Performance AttributionMargin Bridge Analysis

  Explain profit deviation using changes in revenue, GPM, OPM, NPM and expense ratios.

  Report deems GPM inline with expectations, while OPM/NPM below expectation mainly from headcount expansion and rising SG&A, R&D expense ratios.

• Order CycleRevenue Recognition Lag and Order Foresight

  Use revenue recognition cycle and order growth speed to judge subsequent growth momentum.

  Report states revenue recognition time approx one year, 1Q26 revenue aligns with 1Q25 orders, while 1Q26 order growth speed expected faster than current revenue growth.

Asset mapping & comparison

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

• 002371.CH / NAURA Technology Group Co Ltd

  Research coverage subject, Bernstein maintains Outperform rating.

  Strengths

  Benefit from China memory and logic customer capacity expansion, domestic equipment order growth, localization rate improvement, and advanced logic revenue proportion increase potentially improving gross margin.

  Weaknesses

  1Q26 revenue slightly below consensus, OPM/NPM below expectation; Headcount expansion, SG&A and R&D expense ratio increase bring short-term margin pressure.

  Comparison

  Relative to ASIAX, relative performance over past 12 months +9.1%; Report uses ASIAX as benchmark for Asia ex-Japan equity relative performance.

  Risks

  China fab capex below expectations, domestic equipment technology or capacity bottlenecks, LED and PV industry downturn dragging non-fab equipment and electronic components business.

Key data

• 1Q26 RevenueRMB10.3bn+26% YoY, -14% QoQ, approx 3% below consensus.
• 1Q26 Gross Margin~41%Recovered from 37% in 4Q25, 28bps below consensus.
• 1Q26 Net Margin~16%Recovered from 2% in 4Q25, but 164bps below consensus.
• 1Q26 Net Profit Attributable to ParentRMB1,635mnTable shows 28.5% lower than Bernstein forecast, 12.0% lower than consensus.
• 2026 Domestic Equipment New Order Growth Expectation50%+ YoYFrom China memory and logic customers active capacity expansion.
• Target PriceCNY650.00Based on 48x 2027E EPS; Closing Price CNY510.71, corresponding to approx 27% upside space.
• 2027E EPSRMB13.312027 annual earnings per share forecast used in valuation method, lower than previous RMB16.04.
• 2025A/2026E/2027E RevenueRMB39,929mn / RMB50,227mn / RMB62,814mnCorresponding revenue CAGR is 25.4%.

Impact & implications

In the short term, 1Q26 net margin and operating profit margin below expectations may lead to negative stock price reaction; however, report believes this quarter could be a point of earnings expectation clearing. In the mid-term, if company begins communicating stronger order growth to market, investor sentiment may improve. China memory and logic customer capacity expansion, domestic equipment procurement growth, and further rise in localization rates are all viewed as key catalysts driving NAURA order and revenue growth.

Risks

• LED and PV industry long-time downturn may impact NAURA's non-fab equipment and electronic components business.
• China fab capital expenditure lower than expected.
• Domestic equipment localization progress slower than expected, reasons including specific process tech difficulties or domestic equipment manufacturer capacity bottlenecks.
• Headcount expansion and expense ratio increase persistently exceeding revenue growth may continue to suppress OPM and NPM.
• After 1Q26 earnings below expectations, if order growth communication falls short of expectations, market sentiment recovery may be delayed.

What to watch

• Whether company discloses or communicates 1Q26 and 2026 order growth strength.
• 2026 pace of China memory and logic customer capacity expansion.
• Whether advanced logic revenue proportion increase drives 3Q26 gross margin improvement.
• Whether 3Q26 SG&A and R&D expense ratios improve YoY as report expects.
• Speed of domestic semiconductor equipment localization rate increase.
• Whether inventory and contract liabilities shift from 1Q26 relatively stable state to reflecting stronger order or delivery trends.