We recently held an NDR with Naura Technology’s management and we maintain our positive outlook for the Company. We expect Naura to deliver robust revenue growth on capex expansion from downstream clients and accelerated semi localization trend. In addition, we believe the Company could be one of the beneficiaries of the recently launched “Big Fund III” (US$47.5bn) in China. Naura is currently our favourite under the semi localization theme. Reiterate BUY rating for Naura (002371 CH), with an unchanged TP at RMB405.
Geopolitical tensions have driven major economies worldwide to pursue resilience over efficiency, leading to significant investments to strengthen domestic chip fabrication capabilities. The recently established “Big Fund III” (US$47.5bn) in China is so far the largest phase of the series, with registered capital of RMB344bn (vs. Phase I/II: RMB139bn/RMB200bn). The phase III underscores yet another Chinese government’s effort to achieve self-sufficiency in semi amid the escalating geopolitical tensions. Previous phases focused on chip fabrication, equipment, materials, etc., and we expect similar investment interests for Phase III, as well as a potential focus on AI-related areas. We expect Naura to be one of the beneficiaries.
Looking forward, Naura will likely maintain robust growth on capex expansion from clients and accelerated semi localization trend. Key drivers of revenue could be from order wins in CCP, CVD and cleanser products. The Company disclosed that new orders signed in 2023 were RMB30bn, of which 70%+ were for semiconductor equipment and 15% were for new energy/PV. We think these orders will support 40% revenue growth in 2024.
We reiterate our BUY rating for Naura (002371 CH), with an unchanged TP at RMB405, based on the same 39x 2024E P/E. We raise our GPM forecasts by 1.9ppt and 3.9ppt for 2024/25E, considering larger revenue contribution from more advanced equipment. This accretive impact on net profit was offset by a higher projection for R&D spending (~11% of total revenue), as the Company is expanding its product coverage. Risks: 1) intensified competition from overseas and domestic peers, and 2) escalating geopolitical tensions.
