Semiconductor Equipment - Berenberg Bank

Suess Microtec AG
Small/Mid-Cap: Technology Hardware
Small, but active in growing markets
• We initiate on Suess Microtec (SUSS) with a Buy
recommendation and a price target of €9.4. SUSS supplies
equipment used for chip packaging, photomask cleaning, and 3D
integration, which will drive smaller chip sizes once shrinkage stops.
Our Buy rating is based on the following: 1) the lithography segment’s
strong performance (69% of SUSS’s revenue, and 100% of its profit),
which is sufficient to drive group revenue growth; 2) Tamarack
Scientific’s (acquired in 2012) margin may gradually converge to an
average lithography margin of 20%; 3) bonder segment revenue is
likely to triple in 2016/2017 once 3D bonder starts to ship in volume,
driven by chip-makers expanding their 3D packaging capacity; and 4)
the option value of more frequent cleaning for EUV photomasks as
the move to EUV is made – the photomask segment’s revenue could
double from the current €20m-40m level in 2015/2016.
• Key debates: 1) How will the company’s “bread-and-butter”
lithography segment perform in the future? 2) When will 3D bonding
tools show significant growth? 3) Could SUSS become an acquisition
target given its 3D bonding speciality?
1. We expect the lithography segment to grow at 22% in 2014 and
24% in 2015. With Tamarack’s contribution, semiconductor cycle
recovery momentum and its high-growth end-market exposure,
lithography is expected to contribute 100% of group revenue
growth and 95% of group profit growth in 2015. It can therefore
drive group growth even in the absence of a significant
improvement in the other segments.
2. 3D bonder volume shipments may not start before 2016/17, and
some chip-makers may start building pilot lines in 2014/15; our
bull-case assumption gives 9% and 8% revenue upside to our
current group revenue estimates in 2014 and 2015 respectively.
3. We think that an acquisition of SUSS’s 3D bonding business is
unlikely given that: a) AMAT has used EV Group since 2009,
and b) TEL may not have any further acquisition plans in the
near term after acquiring Oerlikon and FSI in 2012.
• Our EPS forecasts are 8% and 11% above consensus for 2014 and
2015. We believe that the lithography segment will be able to drive
total revenue and profit growth even without a material improvement
from the bonder and photomask divisions. We estimate the
lithography operating margin will slowly normalise to 20% after
Tamarack’s integration.
• Our €9.4 price target is based on 14x P/E on 2014 adjusted EPS of
€0.67. The 14x P/E is at the mid of the historical 11-18x multiple
applied in the middle of the order recovery cycle.
Y/E 31.12., EUR m 2011 2012 2013E 2014E 2015E
Sales 175 164 153 188 215
EBIT 19 12 -8 19 29
Net profit 15 8 -8 13 20
Y/E net debt (net cash) -46 -26 -5 -7 -21
EPS (reported) 0.77 0.49 -0.40 0.67 1.04
EPS (Proforma) 0.77 0.41 -0.04 0.67 1.04
CPS 2.43 1.34 0.26 0.38 1.09
DPS 0.00 0.00 0.00 0.00 0.00
Gross margin 37.8% 35.0% 30.0% 36.5% 38.8%
EBIT margin 10.6% 7.2% -5.5% 9.9% 13.7%
Dividend yield 0.0% 0.0% 0.0% 0.0% 0.0%
ROCE 12.9% 7.5% -6.0% 9.6% 13.1%
EV/sales 0.6 0.7 0.9 0.7 0.6
EV/EBIT 5.4 10.4 -17.0 7.5 4.3
P/E 10.0 15.8 -19.3 11.4 7.4
Source: Company data, Berenberg
Buy (initiation)
Rating system
Current price
EUR 7.65
Absolute
Price target
EUR 9.40
19/07/2013 XETRA Close
Market cap EUR 147 m
Reuters SMHNn.DE
Bloomberg SMHN GY
Share data
Shares outstanding (m) 19
Enterprise value (EUR m) 142
Daily trading volume 73,041
Performance data
High 52 weeks (EUR) 10
Low 52 weeks (EUR) 7
Relative performance to SXXP TecDAX
1 month -7.1 % -8.4 %
3 months -12.2 % -13.7 %
12 months -35.3 % -39.9 %
Key data
Price/book value 1.2
Net gearing 0.0%
CAGR sales 2012-2015 9.5%
CAGR EPS 2012-2015 28.8%
Business activities:
Suess is a leading supplier of equipment and
process solutions for the semiconductor and
LED industry.
22 July 2013
Tammy Qiu
Analyst
+44 20 3207 2673
tammy.qiu@berenberg.com
Jean Beaubois
Specialist Sales
+44 20 3207 7835
jean.beaubois@berenberg.com
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