EUR 850.00 For Business Accounts Only

Morningstar | ASM Updated Forecasts and Estimates from 25 Jul 2018

ASM International reported second-quarter results slightly lower than our expectations, primarily due to timing issues for equipment shipments. We surmise that these delays are related to the push-out of certain investments by major memory chipmakers after elevated spending in recent years. Consistent with its peers, ASM noted that overall equipment spending for 2018 will likely grow in the mid- to high single digits versus prior expectations of 10%. Despite near-term uncertainty, we remain positive on the increasing process intensity for advanced logic and memory chips that will fuel strong equipment spending. As chips become more complex, ASM’s atomic layer deposition tools offer more precise processing and superior control for the finer feature sizes that chipmakers must construct compared with traditional deposition tools. However, larger peers such as Applied Materials and Lam Research have also been aggressively targeting the ALD market, which we think will limit ASM’s growth prospects. Consequently, we continue to view shares of no-moat ASM as overvalued relative to our unchanged fair value estimate of EUR 42.

Second-quarter revenue was EUR 208.7 million, up 31% sequentially and 3% year over year, bolstered by strong increases in logic and foundry for advanced 10- and 7-nanometer ramps. Orders (EUR 175.9 million) fell 15% sequentially from record levels during the first quarter, with foundry being the largest segment. Within memory, DRAM accounted for the majority of bookings, as NAND slowed following a recent streak of solid demand. Gross margins rose 430 basis points to 42.1% over the prior quarter, thanks to a more favorable product mix with fewer new products that initially have higher installation costs. Management said it expects third-quarter revenue to be at a midpoint of EUR 190 million, while the second half of 2018 is poised to be stronger than the first half.