AMEC is a leading integrated circuit equipment company in China, focusing on the R&D, production and sales of high-end semiconductors and pan-semiconductor equipment. The company is committed to providing advanced processing equipment and process technology solutions for global integrated circuit and LED chip manufacturers. The company's main product layout includes CCP capacitive plasma etching equipment, ICP inductive plasma etching equipment, deep silicon etching equipment, thin film deposition equipment and MOCVD equipment.

Leading technology in etching equipment, product innovation to promote business expansion, revenue and shipment both high growth. With the evolution of advanced chip manufacturing technology, memory devices have been transformed from 2D to 3D structure, and the strategic position and demand of etching machine as a key core equipment in the semiconductor front-end market have been significantly deepened, and AMEC, as a leading domestic etching equipment supplier, may benefit significantly. In terms of logic chip manufacturing, the 12-inch high-end etching equipment developed by the company continues to receive orders from well-known international and domestic customers, and has been mass-produced in various technical nodes from 65nm to 5nm and beyond. In the memory chip manufacturing process, the company's plasma etching equipment has been widely used in the mass production of advanced 3D flash memory and dynamic random access memory devices. The company is committed to providing a complete set of solutions for ultra-high aspect ratio mask (≥ 40:1) and ultra-high aspect ratio dielectric etching (≥60:1), and has developed an ICP etching machine equipped with ultra-low frequency bias RF for the etching of ultra-high aspect ratio masks, and a CCP etching machine equipped with ultra-low frequency and high power bias RF for ultra-high aspect ratio media etching. Both devices have been successfully verified and are in mass production. In the first half of 2024, the company shipped more than 700 CCP etching equipment, exceeding the annual shipment volume in 2023, and as of June 2024, the company has produced and delivered more than 3,600 CCP etching equipment. In terms of ICP etching equipment, the cumulative installed number of Primo Nanova® series products has exceeded 70% in the past three years. The company's etching equipment revenue in 2023 will be 4.703 billion yuan, and according to the company's 2024 annual performance forecast, the company is expected to achieve 7.276 billion yuan in etching equipment sales, a year-on-year increase of 54.71%. The company continues to promote the research and development of ICP etching machine equipment for 5-3nm logic chip manufacturing, which is expected to promote the company's orders in the field of advanced processes.

The product matrix of thin film equipment has been accelerated, and the order scale has continued to grow. At present, the company has a number of new equipment products into the market, some of which have received repeated orders, and a number of other key thin film deposition equipment research and development projects are progressing smoothly. The company's tungsten series thin film deposition products can cover all tungsten applications of memory devices, and have completed the verification of CVD/HAR/ALDW tungsten equipment by a number of logic and storage customers, and obtained customer orders. The company has planned a variety of CVD and ALD equipment to increase the coverage of thin film equipment and further expand the market. The company's self-developed EPI equipment has successfully entered the customer verification stage to meet the electrical and reliability requirements of the customer's advanced process of germanium-silicon epitaxial growth process. According to the company's 2024 annual performance forecast, the company will achieve the first sales of LPCVD equipment in 2024, and the cumulative shipment of the equipment will exceed 100 reactors, and the annual equipment sales are expected to reach 156 million yuan. We are optimistic about the company's continued breakthroughs in the field of thin film deposition equipment, and with the support of continuous high-intensity research and development, the performance and orders of thin film equipment are expected to continue to grow at a high rate.

Revenue grew rapidly, and R&D efforts continued to increase. The company's operating income maintained rapid growth, from 1.639 billion yuan in 2018 to 6.264 billion yuan in 2023, with a compound annual growth rate of 30.75%. According to the company's 2024 annual performance forecast, the company is expected to achieve operating income of 9.065 billion yuan in 2024, an increase of about 44.73% compared with 2023. The main driver of its performance is the continuous expansion of the etching business, which is expected to grow to 7.276 billion yuan in 2024, with an annual growth rate of 54.71%. Operating income in the fourth quarter of 2024 is expected to reach 3.558 billion yuan, a year-on-year increase of about 60%. The company has continued to invest heavily in R&D for many years, and from 2019 to 2023, the R&D rate has remained above 12%. In 2024, it is estimated that the company's annual R&D investment will be 2.450 billion yuan, an increase of about 94.13% over 2023, and the annual R&D investment is expected to account for 27.03% of the company's revenue, with the overall amount increasing by 1.188 billion yuan. The company continues to maintain a high level of R&D investment, improves the company's product layout in the manufacturing of key components in the semiconductor front-end process, and lays a solid foundation for the sustained high growth of performance.

The semiconductor industry at home and abroad continues to prosper, and the strong demand for micro-processing equipment empowers the company's growth. According to SEMI's forecast, benefiting from the increase in global chip demand and the expansion of equipment spending driven by advanced node processes and processes, the global investment in 300mm wafer fab equipment is expected to reach $400 billion from 2025 to 2027, of which Logic and Micro will invest about $173 billion, and the storage industry will invest more than $120 billion. Chinese mainland is expected to maintain its position as the world's No. 1 in 300mm equipment spending by 2027, with an investment of more than $100 billion in the next three years. Chinese mainland as the world's largest integrated circuit equipment market, Chinese mainland equipment shipments will reach US$36.6 billion in 2023, accounting for about 34.4% of the global market. According to SEMI estimates, Chinese mainland shipments are expected to exceed US$49 billion in 2024, and the proportion of global shipments will increase to 43.4%. At the same time, according to Gartner data, from 2018 to 2025, a total of 171 new chip production lines will be built globally, of which 74 seats will be located in Chinese mainland, and market expansion and capacity increase will enable the company's demand-side growth. As a leading etching equipment in China, the company has accumulated leading professional technology and patent reserves in etching machines and thin film equipment, and is expected to continue to invest in research and development to lay out industrial development in advance, realize the large-scale industrial application of etching equipment and thin film deposition equipment products, expand the company's product coverage advantages, and promote the increase of product market share and business scale growth.

Earnings Forecast and Rating: We expect the company's net profit attributable to the parent company in 2024-2026 to be 16.76/24.85/3.399 billion yuan respectively, with a year-on-year growth rate of -6.15%/48.24%/36.80% respectively, and the PE corresponding to the current stock price is 71.75/48.40/35.38 times respectively. We selected North Huachuang/Tuojing Technology/Shengmei Shanghai/Huahai Qingke/Zhongke Feishi/Xinyuan Micro as comparable companies, with an average valuation of 115.1 times in 2024, given the company's leading position in the field of integrated circuit etching equipment manufacturing, rapid breakthroughs in the field of thin film deposition, high-intensity R&D expenditures and high-speed and stable growth in performance, covering for the first time, giving a "buy" rating.

Risk Warning. The expansion of downstream customers is less than expected; intensifying competition risks in the industry; New product development and customer promotion are not as expected; Uncertainty of geopolitical factors.