AirTAC: Peaking of the cycle; downgrade to Market-Perform

It is a cyclical call — with the peaking of the China FA cycle, Bernstein expects AirTAC growth to decelerate and margins to plateau, and therefore downgrades the stock to Market-Perform. AirTAC performance exhibits one of the most predictable cyclical patterns among FA companies and has just reached peak growth in this cycle. Revenue growth is projected to moderate from 31.6% YoY in 2026E to 11.1% in 2027E and 5.2% in 2028E, while margins and share price performance show unusually clean and stable correlations with revenue growth. AirTAC follows broad China FA demand, similar to 2015-2022 but unlike 2023 when solar and battery capex supported growth; this time there are limited idiosyncratic drivers. Semiconductor exposure remains too small (about RMB 150mn, or ~1.5% of revenue in 2027) to provide meaningful support. China market share has reached 30% and share gains have notably slowed, with the growth premium over SMC in China disappearing after 4Q24. Share could rise to ~35% in fiv