New Taiwan Facility Will Improve Manufacturing Capacity And Efficiency

Key Takeaways

• The new production site in Taiwan and high demand for UV projection scanners are expected to boost manufacturing capacity and drive revenue growth.
  
• Strategic digitalization investments are anticipated to improve operational efficiency and net margins despite short-term cost increases.
  
• Dependency on AI orders and geopolitical risks could impact revenue stability, with capital commitments and rising OpEx further pressuring margins.

Catalysts

Develops, manufactures, markets, and maintains systems to produce microelectronics, microelectromechanical systems, and related applications.

• The company's new production site in Taiwan, scheduled to open by the end of October 2025, is expected to enhance manufacturing capacity and efficiency, supporting revenue growth and improved operating margins.
  
• Continued high demand for the company's UV projection scanners, particularly due to applications in advanced semiconductor processes like CoWoS, is anticipated to drive sales and improve gross profit margins due to economies of scale and favorable product mix.
  
• The introduction of new high-end and mid-end wafer cleaner lines towards the end of 2025 is projected to capture additional market share and contribute to revenue growth and potentially higher gross profit margins.
  
• Strategic investments in digitalization and IT projects, while increasing operating expenses in the short term, are expected to result in long-term efficiencies and cost savings, positively impacting net margins and operational effectiveness.
  
• The strong order book, filled at around €428 million as of December 31, 2024, supports high capacity utilization through 2025 and provides a solid foundation for continued growth in revenue and earnings.

SÜSS MicroTec Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming SUSS MicroTec's revenue will grow by 4.4% annually over the next 3 years.
• Analysts assume that profit margins will increase from 11.7% today to 12.6% in 3 years time.
• Analysts expect earnings to reach €64.2 million (and earnings per share of €3.36) by about May 2028, up from €52.1 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting €77.7 million in earnings, and the most bearish expecting €48.1 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 19.8x on those 2028 earnings, up from 12.3x today. This future PE is greater than the current PE for the GB Semiconductor industry at 12.7x.
• Analysts expect the number of shares outstanding to decline by 0.13% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.22%, as per the Simply Wall St company report.

SÜSS MicroTec Future Earnings Per Share Growth

Risks

• The dependency on AI-related orders for the Bonding business, especially temporary bonders, could pose a risk if the demand for AI diminishes or experiences significant fluctuations, potentially impacting future revenue and earnings stability.
  
• The normalization of demand from China, with orders decreasing by €41.4 million compared to the previous year, underscores the geopolitical risks and market dependency, which may affect future order intake and revenue.
  
• The focus on capital expenditure in the new Taiwan facility suggests increased fixed costs and capital commitments; any delays or issues in ramping up production could negatively impact net margins and return on investment.
  
• Weakness in the Coating and Imaging business in the early part of the year indicates potential market volatility, which could affect overall profitability and gross profit margins if such trends resurface.
  
• Increasing OpEx, particularly related to non-recurring IT and digitalization costs, could pressure EBIT margins if expected revenue growth does not materialize or if there are inefficiencies in operational scaling.

Valuation

• The analysts have a consensus price target of €54.278 for SUSS MicroTec based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €68.4, and the most bearish reporting a price target of just €30.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €507.7 million, earnings will come to €64.2 million, and it would be trading on a PE ratio of 19.8x, assuming you use a discount rate of 7.2%.
• Given the current share price of €33.46, the analyst price target of €54.28 is 38.4% higher.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.