Key Takeaways

Strategic investments in semiconductor and smart mobility sectors are set to boost revenue and capacity amid improving demand.
Organizational restructuring and targeted R&D cuts aim to enhance operational efficiency, EBITDA margins, and earnings growth.
Geopolitical tensions and market uncertainties in automotive and semiconductor segments could strain future revenues and pressure profit margins.

Catalysts

About Jenoptik

Provides advanced photonic solutions and smart mobility solutions in Germany and internationally.What are the underlying business or industry changes driving this perspective?

Jenoptik has invested significantly in a new semi fab in Dresden, which is expected to bolster capacity and revenue potential as semiconductor demand improves. This directly impacts future revenue growth.
The geographical expansion in the Smart Mobility Solutions segment, especially the investment in the North American sales force, is expected to yield positive results, potentially improving order intake and revenue.
Prodomax, part of the dissolved NPC segment, has a potential backlog that could unlock with geopolitical stability, enhancing revenue predictability and contributing to better earnings.
Margin improvements are anticipated from the end of inflated R&D investments in the Smart Mobility segment, positively affecting net margins and EBITDA.
Jenoptik's organizational restructuring into four market-focused divisions aims to improve customer focus and operational efficiency, likely leading to enhanced EBITDA margins and overall earnings growth.

Jenoptik Earnings and Revenue Growth

Jenoptik Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming Jenoptik's revenue will grow by 3.3% annually over the next 3 years.
Analysts assume that profit margins will increase from 8.2% today to 10.2% in 3 years time.
Analysts expect earnings to reach €125.2 million (and earnings per share of €2.02) by about May 2028, up from €91.0 million today. The analysts are largely in agreement about this estimate.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 16.2x on those 2028 earnings, up from 11.0x today. This future PE is lower than the current PE for the GB Electronic industry at 17.7x.
Analysts expect the number of shares outstanding to grow by 1.03% per year for the next 3 years.
To value all of this in today's terms, we will use a discount rate of 6.68%, as per the Simply Wall St company report.

Jenoptik Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Declining order intake driven by turmoil in the automotive market and geopolitical tensions could impact future revenues and strain earnings.
Geopolitical uncertainties, particularly regarding tariffs and trade tensions between the U.S. and Canada, pose risks to revenue and profitability in the automotive and Prodomax segments.
A cautious outlook for 2025 with significant market uncertainties could hinder revenue growth and pressure profit margins.
Seasonal and inventory adjustments in the semiconductor business, coupled with potential reductions in order intakes, may reduce revenue and EBITDA margins in the short term.
The restructuring of business units and potential impact on functional costs, combined with limited operational flexibility in managing fixed costs, might pressure net margins.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of €28.282 for Jenoptik 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 €37.0, and the most bearish reporting a price target of just €20.5.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €1.2 billion, earnings will come to €125.2 million, and it would be trading on a PE ratio of 16.2x, assuming you use a discount rate of 6.7%.
Given the current share price of €17.42, the analyst price target of €28.28 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.