XFAB: Waiting for recovery to materialize

Following the 2Q20 results release last week, we have lowered our FY20 sales and FY21 sales by 7% and 3% respectively, mainly on much lower sales forecasts for its non-core CCC segment. Here, fundamentals are deteriorating with growing price pressure, negative developments in the MEMS microphone business and diminishing mgmt. focus. We reiterate HOLD due to lack of near-term demand visibility, an unfavourable risk/reward profile, and lower growth profile vs. other pure-play foundries. Yet, along with expanding valuation multiples for foundries and more upbeat trends in the auto semi space, we set our new TP at €3.0 ( which still reflects 40% discount vs peers).