Key takeawayNomura sees growth potential from memory equipment orders and product expansion, but component supply constraints are limiting near-term revenue, while profit and cash flow are showing different trends.
Why did third-quarter revenue fall quarter on quarter despite strong orders?
- AMEC reported third-quarter 2026 revenue of 3.635 billion yuan, up 17.2% year on year but down 3.7% quarter on quarter. Nomura attributed the slower growth to a high base in the prior-year period and industry-wide component shortages.
- Supplies of electrostatic chucks, mass flow controllers, valves and pumps were particularly tight. Management said that despite the shortages, 95%–100% of shipments were delivered within the promised timeframe.
- Management said new orders in the first three quarters of 2026 reached a record high, with no slowdown in growth; Nomura estimates they rose more than 50% year on year and expects orders to continue growing strongly in 2027. The gap between order growth and revenue in the quarter makes supply capacity an important condition for converting orders into revenue.
Gross margin improved: how much profit growth came from operations?
- Third-quarter gross margin was 41.7%, up 3.8 percentage points year on year and 2.0 percentage points quarter on quarter. Nomura attributed the improvement to a higher share of high-end products.
- Net profit for the quarter was 1.309 billion yuan, up 159% year on year, driven mainly by 892 million yuan in fair-value gains on financial assets. Excluding one-off items, recurring net profit was 500 million yuan, up 44% year on year but down 22% quarter on quarter.
How do memory orders and new products support growth?
- Memory equipment accounted for approximately 60% of total orders in the first three quarters, with DRAM and NAND each making up roughly half of those orders; DRAM orders grew faster than the overall total. Nomura therefore sees the company as a beneficiary of an upcycle in wafer-fab equipment driven by Chinese memory demand.
- Etching equipment remained the revenue mainstay, contributing around seventy percent of third-quarter revenue. In deposition equipment, cumulative shipments of tungsten CVD and tungsten ALD equipment exceeded 500 process chambers; next-generation molybdenum ALD remains under development.
- The company's newly launched 16-chamber PECVD platform can reportedly improve throughput efficiency by 80%–100%, while Cobra PVD has been delivered to a domestic advanced-logic R&D line. The company aims to cover more than 60% of front-end equipment categories and more than 70% of advanced-packaging equipment categories by 2030.
How has Nomura adjusted its forecasts and valuation?
- Reflecting component shortages, Nomura cut its 2026 revenue forecast by 3.5%, from 16.412 billion yuan to 15.845 billion yuan; it raised its net profit forecast for the same period by 7.6%, from 3.963 billion yuan to 4.264 billion yuan, a change that should be understood in light of the fair-value gains on financial assets.
- The bank expects revenue to rise to 22.647 billion yuan in 2027, up 42.9% from its 2026 forecast, supported mainly by strong orders since the start of this year; however, its model forecasts negative free cash flow of 182 million yuan in 2027, with inventory expected to rise from 8.416 billion yuan at the end of 2026 to 11.828 billion yuan at the end of 2027.
- Nomura maintained its buy rating and 480 yuan target price, based on an enterprise-value-to-sales multiple of 20 times forecast 2027 revenue. Risks to this view include slower growth in Chinese wafer-fab equipment demand, market-share gains falling short of expectations, intensifying competition and worsening component shortages.
