Adoption Of Hybrid Bonding Tech To Drive Future Advances In HBM And ASIC Devices

Key Takeaways

• Adoption of hybrid bonding technology and strategic expansions position Besi for future revenue and earnings growth in advanced logic applications.
  
• Strong liquidity and investments in new technologies enhance Besi's market share, profitability, and shareholder value through increased demand and improved offerings.
  
• Fluctuating market demand, increased expenses, and strategic challenges could pressure BE Semiconductor Industries' revenue growth, margins, and earnings stability.

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 adoption of hybrid bonding technology in advanced logic applications signals potential future revenue growth for Besi, as it is increasingly used in high-bandwidth memory (HBM) and ASIC logic devices, which could drive significant demand for Besi's equipment. (Expected impact on revenue)
  
• The strategic expansion of Besi's advanced packaging production capacity planned for 2025, along with increased R&D spending on next-generation 2.5D and 3D architectures, indicates potential improvements in future earnings through new technology adoption. (Expected impact on earnings)
  
• The potential recovery of the mainstream assembly market in the second half of 2025 could lead to increased demand for Besi's equipment in automotive and other mainstream markets, potentially improving revenue and net margins. (Expected impact on revenue and net margins)
  
• Continued investment in hybrid bonding technology, including the introduction of a second-generation hybrid bonder with higher accuracy and throughput, positions Besi to capture a larger market share and increase profitability through improved product offerings. (Expected impact on revenue and gross margins)
  
• Besi's strong liquidity and cash position, supported by recent refinancing and an ongoing share repurchase program, provides the financial flexibility to invest in growth initiatives, potentially enhancing shareholder value and long-term earnings. (Expected impact on earnings and shareholder returns)

BE Semiconductor Industries Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming BE Semiconductor Industries's revenue will grow by 26.5% annually over the next 3 years.
• Analysts assume that profit margins will increase from 30.0% today to 36.4% in 3 years time.
• Analysts expect earnings to reach €446.7 million (and earnings per share of €5.59) by about March 2028, up from €182.0 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 €298 million.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 33.7x on those 2028 earnings, down from 45.7x today. This future PE is lower than the current PE for the GB Semiconductor industry at 35.0x.
• Analysts expect the number of shares outstanding to grow by 2.76% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.27%, as per the Simply Wall St company report.

BE Semiconductor Industries Future Earnings Per Share Growth

Risks

• Decreased demand in mainstream assembly markets and for automotive applications could negatively impact revenue growth in these segments.
  
• Fluctuations in orders for hybrid bonding and photonics, along with customer timing for new device introductions, suggest volatility which could impact earnings predictability.
  
• Prolonged downturn in assembly markets due to post-pandemic excess capacity may continue to pressure revenue and margins.
  
• Increased R&D expenditures and higher share-based compensation expenses could pressure net margins despite revenue growth.
  
• Rising operating expenses due to higher strategic consulting costs may affect net income and overall financial performance.

Valuation

• The analysts have a consensus price target of €141.971 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 €185.0, 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 €446.7 million, and it would be trading on a PE ratio of 33.7x, assuming you use a discount rate of 7.3%.
• Given the current share price of €104.9, the analyst price target of €141.97 is 26.1% 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.