(BFM Bourse) – The American bank initiated its coverage to “overweight” this Thursday on the manufacturer of semiconductor materials. Morgan Stanley estimates that its gross operating margin could exceed 40% in the fiscal year ending March 2026.
While the Paris Stock Exchange languishes on Thursday – the SBF 120 fell by 0.3% – Soitec manages to distinguish itself. The Isère group saw its action jump by 8.3% around 4 p.m. to 131 euros, taking the lead in the SBF 120 by a long way.
The specialist in semiconductor materials is carried by Morgan Stanley, the American bank having initiated its cover on the value with an advice to “overweight” and a target price of 173 euros.
The past few weeks have not been good for the company. Soitec passed a major profit warning last month due to the fall in smartphone sales itself caused by large inventories in the supply chain. Then the announcement of the departure of the director of operations, Bernard Aspar, considered a key man in the recovery of the company during the last decade, weighed on the action.
Migration to 5G
Nevertheless, in the medium term, the buoyant winds for the group’s activity are blowing too strongly to be ignored. This is basically the message of Morgan Stanley’s analysis which considers that the bad performance of the action constitutes an opportunity to position itself on the title.
The American bank estimates that Soitec should be able to double its revenues, starting from 1.1 billion euros for the financial year ending in March 2023 to reach 2.1 billion euros three years later. As for the gross operating surplus (Ebitda), it would increase from 286 million euros to 861 million euros over the same period, while the corresponding margin would increase to 40.8% against 33.1%.
Morgan Stanley believes that Soitec’s “RF-SOI” technology, silicon-on-insulator substrates applied at radio frequency, will be driven by the migration of 3G/4G phones to 5G as well as “the growing relevance of the company’s technologies for radio frequency needs”, including in telecommunications infrastructures. For “FD-SOI” substrates, used in transistor architecture, the establishment sees growth drivers in the Internet of Things (IoT), advanced driver assistance systems, but also in devices “intelligent” incorporating artificial intelligence.
Investor day in early June
The American bank also highlights the promising prospects of the company’s technologies in silicon carbide (SiC), a refractory ceramic whose properties make it a key component for all applications in the semiconductor industry, especially for the automobile. In this field, Soitec has developed a family of “SmartSiC” substrates for electric mobility and smart networks. STMicroelectronics joined forces with Soitec last year to adopt this technology.
The jump in revenue from this new opportunity would be substantial, according to Morgan Stanley’s expectations, going from more than 11 million euros for the financial year ending in March 2024 to 260 million euros for that ending in March 2026. This due to the growth in the use of electric vehicles.
It should be noted that apart from Morgan Stanley, the bank UBS confirmed its recommendation to buy and adjusted its target price to 178 euros against 180 euros, ahead of the day dedicated to Soitec investors, on 8 next June. The Swiss establishment notes that investors fear that the company will lower its objectives for the financial year ending in March 2024 (stable turnover over one year at constant scope and exchange rates and an EBITDA margin of around 36%) but he considers that the current price already includes this hypothetical announcement. UBS also highlights the company’s medium-term growth drivers, namely the rise of 5G and the development of “SmartSiC”.
Julien Marion – ©2023 BFM Bourse
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