AI Packaging And Hybrid Bonding Will Transform Assembly Market

Key Takeaways

• Anticipated market growth and advancements in hybrid bonding and advanced packaging for AI applications could drive future revenue and earnings growth.
  
• Strategic collaboration with Applied Materials and strong R&D investments may enhance technology confidence and improve gross margins.
  
• Challenges in mobile, automotive, and Chinese markets, coupled with competitive pressures and high R&D costs, may constrain revenue growth and profitability.

Catalysts

Develops, manufactures, markets, sells, and services semiconductor assembly equipment for the semiconductor and electronics industries in the Netherlands, Switzerland, Austria, Singapore, Malaysia, and internationally.

• The anticipated upturn in the assembly market, with TechInsights forecasting a 13% increase in 2025 and a 26% increase in 2026, could drive future revenue growth for BE Semiconductor Industries.
  
• Significant growth potential in advanced packaging for AI applications is expected, which could positively impact revenue.
  
• Continued progress in hybrid bonding applications, including follow-on orders from leading foundries and memory producers, positions the company well for future earnings growth.
  
• The strategic collaboration with Applied Materials, along with their 9% ownership stake, reinforces confidence in Besi's technology and could lead to improved gross margins through technological advancements.
  
• Ongoing R&D investments and a strong market position in wafer-level assembly technology are likely to support future revenue and earnings growth as next-generation AI applications become more prevalent.

BE Semiconductor Industries Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming BE Semiconductor Industries's revenue will grow by 24.7% annually over the next 3 years.
• Analysts assume that profit margins will increase from 29.7% today to 35.7% in 3 years time.
• Analysts expect earnings to reach €419.3 million (and earnings per share of €5.15) by about May 2028, up from €179.5 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting €559 million in earnings, and the most bearish expecting €263.7 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 32.3x on those 2028 earnings, down from 41.6x today. This future PE is greater than the current PE for the GB Semiconductor industry at 30.8x.
• Analysts expect the number of shares outstanding to grow by 2.65% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.62%, as per the Simply Wall St company report.

BE Semiconductor Industries Future Earnings Per Share Growth

Risks

• Ongoing weakness in mobile and automotive end user markets, coupled with challenges in the Chinese market, may continue to suppress revenues and net margins.
  
• Uncertainties around global tariffs and trade disruptions could adversely affect the timing and trajectory of mainstream market recoveries, potentially impacting future earnings.
  
• Gross margins have been trending towards the lower end of the company's target range due to a less favorable product mix and forex headwinds, which could affect profitability.
  
• Continued high levels of R&D investment in next-generation technologies like hybrid bonding are necessary but may pressure short-term margins and earnings.
  
• The competitive landscape, particularly from increasing activity in hybrid bonding technology in China, poses a risk to revenue growth and market share.

Valuation

• The analysts have a consensus price target of €127.795 for BE Semiconductor Industries 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 €175.0, and the most bearish reporting a price target of just €95.0.
• 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 €419.3 million, and it would be trading on a PE ratio of 32.3x, assuming you use a discount rate of 7.6%.
• Given the current share price of €94.09, the analyst price target of €127.79 is 26.4% 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.