Dresden Fab And Smart Mobility Will Accelerate Digital Transformation

Key Takeaways

• Jenoptik's advanced photonics and rapid conversion capabilities position it to outperform peers as demand surges in AI, data centers, and smart mobility markets.
  
• Operational improvements and digital investments are set to boost margins and cash flow, fueling further reinvestment and sustained above-guidance revenue expansion.
  
• Exposure to cyclical industries, supply chain disruptions, and slow adaptation to digital trends are pressuring Jenoptik's revenues, margins, and future sales stability.

Catalysts

Provides advanced photonic solutions and smart mobility solutions in Germany and internationally.

• Analysts broadly agree that the new semi fab in Dresden will increase capacity and unlock revenue as semiconductor demand improves, but this likely significantly understates the upside: Jenoptik's ability to rapidly convert orders into sales thanks to shorter lead times and point-of-completion accounting means an industry upcycle, driven by AI and data center demand, could translate into a sharp, outsized revenue and EBITDA surge well ahead of peers.
  
• Analyst consensus highlights the benefits from geographic expansion in Smart Mobility Solutions, but with 18% revenue growth in H1 already witnessed from U.S. and MEA markets and the successful ramp of the North American salesforce, Jenoptik is set to outpace expectations as accelerating smart city adoption and traffic automation unlock multi-year, double-digit revenue growth and leverage net margins.
  
• The ongoing surge in global automation and smart manufacturing is still in its early innings, and Jenoptik's leading-edge photonics and precision optics position it to capture disproportionate market share, supporting consistently higher topline growth and structural net margin expansion as end-market adoption accelerates across automotive, industrial, and medical sectors.
  
• Rapid digital transformation in data centers, AI infrastructure, and healthcare is boosting demand for advanced optical components; Jenoptik's early investments in technologies like grayscale lithography and AR/VR optics put it at the epicenter of these trends, with underappreciated potential to drive sustained revenue growth above management guidance.
  
• Intensified cost management-with headcount reductions, operational improvements, and a sharp rise in cash conversion rates from 41% last year to 55%-will yield a faster normalization of margins and release significant free cash flow, strengthening Jenoptik's ability to reinvest opportunistically and accelerate future earnings growth.

Jenoptik Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Jenoptik compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Jenoptik's revenue will grow by 6.9% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 6.8% today to 11.2% in 3 years time.
• The bullish analysts expect earnings to reach €146.9 million (and earnings per share of €2.55) by about August 2028, up from €73.2 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 16.9x on those 2028 earnings, up from 13.8x today. This future PE is lower than the current PE for the GB Electronic industry at 27.5x.
• Analysts expect the number of shares outstanding to grow by 1.39% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 6.88%, as per the Simply Wall St company report.

Jenoptik Future Earnings Per Share Growth

Risks

• Ongoing global market uncertainty, supply chain disruptions, and de-globalization have created significant volatility across Jenoptik's core markets, which management repeatedly cited as impacting order intake and revenue, raising the risk of continued weak top-line growth in future periods and potentially lower overall revenue.
  
• Heightened exposure to cyclical sectors such as semiconductors and automotive has resulted in pronounced year-over-year revenue declines and substantial EBITDA margin compression, making future earnings highly vulnerable to further downturns in these industries.
  
• The company's shrinking backlog, down over €100 million year-over-year, and persistent book-to-bill ratio below 1 in the first half, signal difficulty in sustaining revenue stability, suggesting ongoing challenges for near
• and medium-term sales growth.
  
• Increasing geopolitical tensions and rising tariffs, particularly for the Metrology & Production Solutions segment, are having a direct and growing negative effect on gross margins, while continued uncertainty about exemptions or the ability to offset these costs could further squeeze unit profitability.
  
• Rapid industry shifts toward digitalization and AI solutions may structurally disadvantage Jenoptik's hardware-heavy business model, especially as larger global competitors invest aggressively in R&D, potentially eroding future market share, innovation leadership, and gross margins.

Valuation

• The assumed bullish price target for Jenoptik is €34.43, which represents two standard deviations above the consensus price target of €25.23. This valuation is based on what can be assumed as the expectations of Jenoptik's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €35.0, and the most bearish reporting a price target of just €18.5.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be €1.3 billion, earnings will come to €146.9 million, and it would be trading on a PE ratio of 16.9x, assuming you use a discount rate of 6.9%.
  
• Given the current share price of €17.65, the bullish analyst price target of €34.43 is 48.7% 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.