Let me first walk through the four-quarter curve in my head. Revenue climbed from RMB 1.094 billion in Q2 2025 all the way up to RMB 1.313 billion in Q4, then went essentially flat in Q1 2026, holding at RMB 1.306 billion — this tells me our shipment cadence has already shifted from "sequential quarter-over-quarter high growth" to a "high-level plateau," driven by persistently full utilization rates at domestic wafer fabs and sputtering target shipments tracking fab capacity. Gross margin in Q1 suddenly jumped to 32.9%, opening a 4–10 percentage point gap versus the 22.8%–27.5% range of the prior three quarters. The main driver is the rising mix of advanced process nodes: copper-manganese and copper-aluminum alloy targets at 7nm and below carry meaningfully higher unit prices than mature-node equivalents, which naturally lifts the margin structure.
Based on this read, I've built two key assumptions for the next two quarters. First, advanced-node penetration continues to climb, but won't leap every quarter the way Q1 did — the steady ramp of 28nm/14nm is the main theme, with 7nm/5nm share edging up only gradually. So gross margin steps down from 32.9% into the low-30s, which is "stabilizing at a high level" rather than "mean reversion." Second, the traditional semiconductor second-half peak season layered on top of the domestic fab expansion high point gives Q3 revenue a seasonal acceleration, which I'm placing around RMB 1.45 billion, with Q2 as the transition quarter at RMB 1.365 billion. On the net profit line, I'm modeling RMB 218 million for Q2 and RMB 228 million for Q3, with net margin holding around 16% on a non-GAAP (excluding non-recurring items) basis.
The biggest risk is the sustainability of that gross margin. I can't fully tell yet whether the Q1 32.9% figure contains one-off factors — FX gains, inventory write-down reversals, or the concentrated recognition of high-unit-price orders. If there's non-recurring P&L noise mixed in, a reversion to 28% or even 27% gross margin in Q2 is entirely plausible, which would pull net profit straight back into the RMB 160–170 million range. Another lurking concern is volatility in high-purity metal raw material prices — copper, tantalum, tungsten, once these upstream inputs move, target makers typically face a one-to-two-quarter lag in pricing pass-through, which compresses gross margin. Then there's the D&A pressure during the capacity ramp: if new lines come online faster than utilization can follow, fixed costs will eat into a chunk of margin. So my call on Q2 and Q3 is "moderate growth, earnings elasticity still intact, but don't expect every quarter to pop like Q1 did."