Our 12-month target price for AMEC of Rmb220 is based on ~11x 2025E sales, set at the long-term average P/S after 2022, when AMEC's P/S  stabilized. We adopt a P/S valuation method because the profitability of AMEC could be volatile given the relatively small sales scale and yet to stabilize net margins (impacted by intense R&D and large subsidies). We think P/S best captures the market recognition and track record of the semi equipment business, an important factor to value an early-stage semi equipment maker.

Key fundamental downside risks that could impede the stock from reaching our target price include 1) stricter US restrictions, 2) a weaker-than-expected semiconductor cycle turnaround, and 3) weaker-than-expected GPM.