Huaxin Securities: First initiated a "buy" rating for PRODUCTIVE TECH(00650), with the net profit margin expected to see a significant increase.

Huaxin Securities released a research report stating that PRODUCTIVE TECH (00650) is transforming from a traditional energy and investment company to a hard technology manufacturer achieving breakthroughs in high-end process technology in the field of semiconductor wet cleaning equipment. The company's core business is at the intersection of two historical trends: the expansion of domestic semiconductor plants and the localization of semiconductor equipment. With the large-scale validation and mass delivery of the company's semiconductor equipment in wafer factories, the company is expected to reach a turning point in profitability in the 2027 fiscal year, with profit margins entering an upward channel. It is expected that the company's net profit margin will see a significant increase in the future, and the firm is optimistic about the company's long-term growth prospects, initiating coverage and giving PRODUCTIVE TECH a "buy" rating. Huaxin Securities' main points are as follows: Expansion cycle combined with domestic substitution, opening a golden development period of dual opportunities From the demand side, fabs represented by Semiconductor Manufacturing International Corporation and HUA HONG SEMI, as well as storage manufacturers represented by Yangtze Storage and Changxin Storage, are in an expansion cycle. Coupled with the increase in advanced process steps, the demand for cleaning equipment is increasing in quantity and value. On the supply side, the global cleaning equipment market has long been dominated by overseas giants like Japanese DNS, Tokyo Electronics, and Lam. The localization rate in high-end areas such as high-temperature SPM is almost zero. However, in a complex international environment, supply chain autonomy has become a national strategy and a rigid demand for chip manufacturers. Domestic equipment manufacturers are entering an unprecedented window of opportunity for validation. With China being the world's largest semiconductor equipment market, the scale of the cleaning equipment subfield alone has exceeded hundreds of billions and continues to grow, providing a broad stage for growth for domestic manufacturers with technological capabilities. Breakthroughs in high-end process localization, dual-wheel growth of wet chemical full matrix and LPCVD The company successfully tackled the high-temperature sulfuric acid cleaning (HT SPM) process that has been monopolized by international giants for a long time. The high-temperature sulfuric acid cleaning process is a core essential link for the manufacturing of 28nm and below advanced processes and 3DNAND. The OCTOPUS-HTSPM equipment has passed rigorous marathon testing by customers, with performance indicators reaching international mainstream levels and achieving the first delivery, marking a key breakthrough for the company in the high-end cleaning equipment "bottleneck" process. In terms of product layout for cleaning equipment, the company has formed a three-dimensional product matrix with three main platforms: the CUBE platform meets the diverse needs of the power device and SiC markets with leading process capabilities and high productivity, and has received repeat orders; the core flagship OCTOPUS platform with 16 chambers, with a maximum throughput increase of over 23% compared to similar products, has successfully entered the 28nm production line of domestic leading wafer factories; the PARALLELLO slot cleaning machine further enhances the batch product line with advanced surface contamination control capabilities. In addition, the company strategically deployed low-pressure chemical vapor deposition (LPCVD) furnace tube equipment through its holding subsidiary Xinkai Semiconductor. This type of equipment is mainly monopolized by Japanese companies TEL and KE, with very low localization rates. The company's LP-S iN prototype has completed customer acceptance, and the ALD-S iN prototype has also been delivered for customer testing, with technical parameters benchmarked against international standards. LPCVD furnace tube equipment is expected to become the second growth driver for the company's semiconductor equipment business, helping the company transition strategically towards being a high-end domestic semiconductor equipment manufacturer with multiple product lines. Profit forecast It is forecasted that the company's revenue for the years 2026-2028 will be 4.47, 7.69, and 14.69 billion Hong Kong dollars, with EPS of -0.02, 0.01, and 0.04 respectively. The corresponding PE ratios for the current stock price are -13.11, 19.43, and 7.57. Taking into account the company's semiconductor equipment in the early stages of introducing new products (LPCVD, slot cleaning) to the market and the company's advantages in the "bottleneck" processes of high-end semiconductor cleaning and thin film deposition; with the large-scale validation and mass delivery of the equipment in wafer factories, the company is expected to reach a turning point in profitability in the 2027 fiscal year, with profit margins entering an upward trajectory. It is believed that the company has good long-term growth potential, with the initiation of coverage and a "buy" rating. Risk warnings: macroeconomic risks; downstream wafer factory expansion progress falling short of expectations; fluctuations in oil and gas prices and risks of energy transition; risks of cyclical and excess capacity in the photovoltaic industry.