Investment Highlights:

Company Profile: Domestic Etching Equipment + MOCVD Leader, Successfully Breaking the Foreign Monopoly AMEC is a leading enterprise in domestic etching equipment, fully covering semiconductor etching applications; The company's MOCVD equipment has occupied an absolute leading market share in the blue-green LED production line. The CCP etching machine Primo SD-RIE developed by the company with adjustable electrode spacing has entered the leading logic chip manufacturing customers in China for on-site verification; The company's self-developed Primo UD-RIE with high-power 400kHz bias RF for ultra-high aspect ratio etching has been verified on the production line to have the ability to etch ≥ 60:1 aspect ratio structure. The Primo Nanova series of ICP etching equipment has achieved a compound annual growth rate of > 100% in the number of installed cavities at the customer in the past three years.

Industry pattern: The prosperity of the semiconductor equipment industry is expected to rebound, and the scale of global semiconductor equipment continues to expand with the rise of emerging technologies such as 5G and AI, and the market size will decline in 2023 due to the weak downstream chip cycle and high terminal inventory, and the demand is expected to pick up in 2024, and the global semiconductor equipment market size will reach $105.3 billion. According to the semiconductor industry observation, citing Knometa Research data, the wafer production capacity of the Chinese market continues to increase, and it is expected to occupy the top spot in 2026, driving long-term demand for semiconductors.

The company's products: the three-dimensional strategy is steadily promoted, the products are oriented to domestic and foreign customer groups, the company steadily promotes the three-dimensional strategy, etching equipment and MOCVD equipment to maintain competitive advantages.

The CCP etching equipment was sold in multiple batches and the Damascus etching process was progressing well. The company's 8-inch and 12-inch deep silicon etching machines in the ICP technology equipment category, the Primo TSV 200E and Primo TSV 300E, continue to receive repeat orders in mature markets such as wafer-level advanced packaging, 2.5D packaging and MEMS-on-chip lines, while successfully validating the through-silicon via etching process for 12-inch 3D chips and have the opportunity to be certified on the 12-inch MEMS-on-chip production line of European customers. MOCVD equipment is at the forefront of the industry, and the development of dedicated MOCVD equipment for Micro-LED applications is smooth. The company has developed 4 new thin film deposition products.

Profit Forecast and Investment Suggestions

We expect the company to achieve operating income of 82/109/13.9 billion yuan in 24-26 years, corresponding to the current PS valuation of 14/11/8 times, and net profit attributable to the parent company of 17/23/2.9 billion yuan, corresponding to the current PE valuation of 69/50/39 times. We believe that the company is a leader in the etching equipment industry, and has begun to receive orders for various new equipment for thin film deposition, and has the strength of a platform equipment company. First coverage, with a "buy" rating.

Risk Warning: The

risk of large fluctuations in capital expenditure of downstream customers and the cyclical characteristics of the industry, the risk of less than expected expansion of downstream customers, the risk of changes in government subsidies and preferential tax policies, the risk of intensified competition in the industry, and the risk of product development/promotion falling short of expectations.