Semiconductor Equipment - Berenberg Bank

Applied Materials Inc
Technology Hardware
Valuation
Our valuation is based on a P/E multiple. Our price target of $14.40 implies a P/E
of 12x based on 2014 EPS estimates of $1.20.
Historically, AMAT has traded between 8x and 24x P/E during the semiconductor
industry recovery cycle (from end-2009 to 2011 – see Figure 14). We believe we
entered the recovery cycle at the start of 2013, when an increase in order levels was
reported by front-end players such as ASML, AMAT, TEL and KLA. AMAT was
trading at 10-14x between June and September 2010, which was six months after it
entered the recovery cycle. Our P/E of 12x is in the middle of range of the
historical 10-14x mid-recovery cycle P/E, and it is in line with its peer group
median multiple based on 2014 earnings.
Figure 14: 8-14x P/E in the middle of the semiconductor recovery cycle
S Bl b d
Source: Bloomberg data
Figure 15: Peer group valuation
Company Name PE EV/EBIT EV/Sales
FY 2013E FY 2014E FY2015E FY 2013E FY 2014E FY2015E FY 2013E FY 2014E FY2015E
NIKON CORP 14.12 13.42 12.25 9.83 8.28 8.53 0.82 0.80 0.87
ASM INTL NV 27.03 14.02 13.19 50.89 10.49 13.21 3.13 1.91 1.52
ASML HOLDING NV 25.04 15.67 12.17 21.81 10.74 2.10 4.80 3.73 0.67
KLA-TENCOR CORP 16.94 13.21 11.26 9.43 7.59 2.97 2.46 2.21 0.95
LAM RESEARCH 20.99 11.64 10.15 14.73 8.28 2.90 1.74 1.44 0.58
ULVAC INC na 10.21 7.36 25.28 12.27 15.08 0.82 0.75 1.04
DAINIPPON SCREEN 28.32 14.13 14.41 67.36 11.63 13.66 0.76 0.70 0.81
TOKYO ELECTRON 48.60 20.98 18.74 25.57 9.75 5.61 1.16 1.02 0.72
Mean 22.63 14.16 12.44 28.12 9.88 8.01 1.96 1.57 0.89
Median 23.01 13.72 12.21 23.55 10.12 7.07 1.45 1.23 0.84
APPLIED MATERIAL 23.30 13.18 11.92 17.43 10.77 4.87 2.35 1.92 0.91
Source: Bloomberg data
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