ROFIN-SINAR Technologies

ROFIN-SINAR Technologies 04 February 2011
Healthy 1Q10/11 results and raise in management guidance
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Please see the important disclaimer & company disclosures at the end of this report
BHF-BANK Research
Rofin-Sinar’s 1Q10/11 results came in higher than we expected and above management’s guidance. Revenues of
US$137.1m (vs. BHF-BANK estimate of US$131.1m) increased by 10.3% QoQ and reached pre-crisis levels. With
the exception of the machine tool industry, where revenues remained flat QoQ, all end markets contributed to sequential
growth, i.e. automotive & sub-suppliers +47%, semiconductor/electronics/solar +14%, others +10%.
Geographically, demand from European customers rebounded the strongest compared to the previous quarter
(+19%), while North America (+8% QoQ) and Asia (+2% QoQ) also showed further improvements in demand. Quarterly
order intake of US$144.6m matched our forecasts and also recovered to pre-crisis levels. In its conference
call, management stated that order intake to date in the second quarter is encouraging (BHF-BANK estimate:
US$151.0m, +4.4% QoQ). Mainly due to the improvement in the top line, 1Q10/11 operating profit of US$21.5m
and net income of US$14.9m beat our estimates of US$ 21.0m and US$12.6m, respectively.
Largely due to stronger demand coming from the machine tool sector as well as very healthy order intakes from all
end markets in January, management raised its FY11 guidance, which now targets revenues of US$540-560m, up
from US$500-520m. Moreover, management raised its EBT-margin goal by 1 percentage point to 14-16%.
Lifting estimates
Due to the better quarterly results as well as further improvements in the mechanical engineering sector (which is
underscored by recent VDMA data), we have lifted our FY11 and FY12 estimates as follows:
Fig 1 Raising estimates
(US$m)
FY2010 FY2011 FY2012
New Company
guidance
Old Change New Old Change
Revenues 423.6 556.2 540-560 523.5 6.2% 597.9 562.8 6.2%
Gross margin 39.3% 41.1% 40-41% 40.5% 0.6% 41.8% 41.6% 0.2%
Income from operations 44.0 86.8 - 79.8 8.8% 99.4 92.4 7.6%
Operating income margin 10.4% 15.6% - 15.2% 0.4% 16.6% 16.4% 0.2%
EBT 45.9 88.3 75.6-89.6 81.3 8.6% 101.0 94.0 7.5%
EBT margin 10.8% 15.9% 14.0-16.0% 15.5% 0.4% 16.9% 16.7% 0.2%
Net income 29.8 57.7 - 52.7 9.5% 66.0 60.9 8.4%
Diluted EPS (US$) $1.02 2.01 - 1.84 9.2% 2.30 2.12 8.5%
Source: Company data, BHF-BANK estimates
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Raising target price to US$39.00 in line with current market values
Given higher estimates we have increased our DCF-based (WACC: 9.4%, beta 1.1x, terminal value growth rate: 2.0%
[based on GDP], sustainable EBIT margin: 14.5%) target price from US$ 36.00 to US$ 39.00. Our price target implies a
FY12F PER of 17x, in line with Rofin-Sinar’s historical 1-yr-forward PER range of 16-17x. However, after the strong rally of
the share price in the past few months and given that the stock now trades in line with our target, we downgrade to Market
Weight from Overweight. The key upside risk to our rating is higher-than-expected revenues in the fibre lasers business.
Downside risk include worsening of the business environment in major end markets such as the machine tool and
semiconductor/solar/consumer electronics industries.