Huaxin Securities has released a research report stating that PRODUCTIVE TECH (00650) is transforming from a traditional energy and investment company into a high-tech manufacturer achieving domestic breakthroughs in high-end semiconductor wet cleaning equipment. The company's core business is positioned at the intersection of two historic trends: the expansion of domestic wafer fabs and the localization of semiconductor equipment. As the company's semiconductor equipment undergoes large-scale validation in wafer fabs and transitions to volume delivery, it is expected to reach an inflection point in profitability in fiscal year 2027, with margins entering an upward trajectory. The brokerage forecasts a significant potential leap in the company's future net profit margin. Bullish on PRODUCTIVE TECH's long-term growth prospects, Huaxin Securities has initiated coverage with a "Buy" rating.
The key points from Huaxin Securities are as follows:
**Expansion Cycle and Domestic Substitution Unlock a Golden Development Period** On the demand side, fabs represented by SMIC and Hua Hong Semiconductor, alongside memory manufacturers like Yangtze Memory Technologies and ChangXin Memory Technologies, are in an expansion cycle. Coupled with a surge in advanced process steps, this directly drives an increase in both the quantity and value of cleaning equipment required. On the supply side, the global cleaning equipment market has long been monopolized by overseas giants such as Japan's DNS, Tokyo Electron, and Lam Research. The localization rate in high-end areas like high-temperature SPM is nearly zero. However, in the current complex international environment, supply chain autonomy has become a national strategy and a rigid demand for chip manufacturers, providing domestic equipment makers with an unprecedented window for validation and adoption. As the world's largest semiconductor equipment market, China's cleaning equipment segment alone represents a market exceeding RMB 10 billion and continues to grow, offering a vast stage for capable domestic players.
**Breakthrough in High-End Processes with Dual Growth Engines: Wet Cleaning and LPCVD** The company has successfully overcome the high-temperature sulfuric acid peroxide mixture (HT SPM) process, long dominated by international giants. This process is essential for 28nm and below advanced nodes and 3D NAND manufacturing. Its OCTOPUS-HTSPM equipment has passed rigorous customer marathon testing, with performance metrics reaching international mainstream levels and achieving initial delivery, marking a critical breakthrough in a key bottleneck area for high-end cleaning equipment. Regarding its product portfolio, the company has established a comprehensive matrix across three platforms: The CUBE platform meets the diverse needs of the power device and SiC markets with leading process capability and high productivity, securing repeat orders. The flagship OCTOPUS platform features a standard 16 chambers, offering a maximum throughput over 23% higher than comparable products, and has been successfully introduced into 28nm production lines at leading domestic fabs. The PARALLELLO batch cleaning machine further completes the batch product line with advanced surface contamination control capabilities. Additionally, through its controlled subsidiary, the company is strategically expanding into low-pressure chemical vapor deposition (LPCVD) furnace equipment, a segment primarily monopolized by Japan's TEL and KE with an extremely low localization rate. Currently, the company's LP-SiN prototype has passed customer acceptance, and an ALD-SiN prototype has been delivered for testing, with technical parameters benchmarked against international standards. LPCVD furnace equipment is expected to become the second growth engine for the company's semiconductor equipment business, facilitating a strategic transition into a multi-product line provider of high-end domestic semiconductor equipment.
**Earnings Forecast** The brokerage forecasts revenue of HKD 447 million, HKD 769 million, and HKD 1.469 billion for fiscal years 2026, 2027, and 2028, respectively. Earnings per share (EPS) are projected at -HKD 0.02, HKD 0.01, and HKD 0.04 for the same periods. The current share price implies PE ratios of -13.11x, 19.43x, and 7.57x, respectively. Considering the company's position in the early stages of launching new products (LPCVD, batch cleaning) and its strategic advantage in two critical bottleneck areas—high-end cleaning and thin-film deposition—the report is optimistic. As equipment undergoes large-scale validation and moves into volume delivery, the company is expected to reach a profitability inflection point in FY2027, with margins beginning to rise. A substantial improvement in net profit margin is anticipated. Huaxin Securities is positive on the long-term growth potential and initiates coverage with a "Buy" rating.
**Risk Warnings:** Macroeconomic environment risks; slower-than-expected expansion progress by downstream wafer fabs; fluctuations in oil and gas prices and risks associated with energy transition; photovoltaic industry cycles and risks of overcapacity.
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