Building for the next leg of WFE growth

PLEASE READ THE ANALYST CERTIFICATION AND IMPORTANT DISCLOSURES ON LAST PAGE MORE REPORTS FROM BLOOMBERG: RESP CMBR <GO> OR http://www.cmbi.com.hk 1 MN 21 Apr 2026 CMB International Global Markets | Equity Research | Company Update Naura Technology (002371 CH) Naura Technology (002371 CH) - Building for the next leg of WFE growth Building for the next leg of WFE growth Naura reported FY25 revenue of RMB39.4bn, up 31% YoY and broadly in line with our and Bloomberg consensus, while net profit declined 1.8% YoY to RMB5.5bn, below expectations due to heavier R&D investment and opex associated with increased hiring and Kingsemi consolidation. While 4Q margin came under pressure, we view this primarily as a result of intensified product validation rather than deterioration in end demand. Encouragingly, the Company continued to deliver strong top-line momentum on robust IC equipment growth (50%+ YoY) and ongoing product expansion into higher-value process steps. We remain positive on Naura’s positioning as a core beneficiary of China’s WFE localization trend and domestic foundry capex expansion. Maintain BUY and raise TP to RMB540, based on 35x 2027E P/E (prev. 35x 2026E P/E), as we look through near-term margin headwinds and focus on the sequential recovery and the anticipated earnings inflection in 2027E.  Naura’s etching and deposition segment revenue both exceeded RMB10bn in FY25, driving IC equipment revenue growth of more than 50% YoY, per mgmt. We believe this performance shows Naura’s strengthening position in China’s domestic WFE supply chain. Looking ahead, new product offerings such as 12-inch PVD, vertical furnace systems and HBM-related hybrid bonding solutions should support deeper penetration into logic, memory and advanced packaging, providing a broader and higher-quality growth runway into 2026E and beyond. We expect IC equipment sales to grow by over 40% YoY in 2026E.  Near-term profitability softened on investment and validation but should improve as scale benefits emerge. Naura’s 4Q margins were pressured by elevated component upgrade costs during client validation for new products and weaker profitability in non-IC segments such as PV. At the same time, Naura continued to invest aggressively for future growth, with R&D expenses up 46% YoY and admin expenses rising 102% YoY following the Kingsemi consolidation and headcount expansion. We expect profitability to improve progressively as validated tools move into volume production, product mix shifts further toward IC equipment, and operating leverage strengthens into 2H26.  Maintain BUY with TP revised to RMB540, based on its three-year historical forward average P/E. We remain bullish on China’s WFE sector, as accelerating domestic substitution and sustained capex from logic and memory foundries continue to reinforce a strong multi-year growth backdrop. With the most comprehensive WFE portfolio among domestic peers, Naura is positioned to capture this opportunity acros