EUR 850.00 For Business Accounts Only

Morningstar | ASM Benefits From Impressive Logic and Foundry Demand for its ALD Tools; Raising FVE to EUR 50

ASM International reported first-quarter results that were ahead of our expectations, thanks to solid demand for its atomic layer deposition, or ALD, tools from logic and foundry customers. While wafer fab equipment spending will be significantly lower in 2019 because of considerable weakness in memory, equipment demand in logic and foundry is poised to remain healthy, particularly at the leading edge. ASM has been benefiting immensely from Intel’s capacity expansion in 10-nanometer coupled by initial research and development investment in 7-nm. Specifically, the 10-nm marks a significant inflection point for ASM in terms of greater ALD layer count versus Intel’s current 14-nm process. We are raising our fair value estimate to EUR 50 from EUR 42 per share as we incorporate a stronger near-term outlook. Although greater complexity should drive higher adoption of ALD, larger peers such as Lam Research have also been targeting the market, and thus we view ASM’s shares as overvalued.

First-quarter revenue was EUR 249 million, up 56% year over year due to the aforementioned logic and foundry demand. Orders of EUR 235 million exceeded guidance, though they were down 22% sequentially from last quarter’s record levels. Gross margins were 41.3%, down 40 basis points from the prior quarter, due to modestly lower sales volume. Management said it expects second-quarter revenue to be at a midpoint of EUR 240 million, up from EUR 215 million disclosed last quarter. Consequently, we expect ASM to comfortably outperform the broader WFE market in 2019.