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AT&S Technology Trading At Discount To Peers

Published 03/05/2015, 01:01 AM
Updated 07/09/2023, 06:31 AM

Advanced application printed circuit boards
AT&S (XETRA:ATSV) supplies high-end printed circuit boards in low and high volumes for demanding applications including high-end mobile devices, automobiles, niche industrial uses and healthcare applications. This high-end focus enables it to deliver higher margins than its peers. Longer term, the business is expected to grow by becoming the first high-volume IC substrate manufacturer in China.

Results for nine months ended December 2014
Revenues grew by 8.5% year-on-year to €489.4m. The industrial & automotive segment grew during Q1 and Q2, reflecting the increased use of innovative electronics in passenger cars. The mobile devices segment showed strong growth in Q3 linked to product launches, as well as a favourable product mix and beneficial currency movements. AT&S was able to achieve this revenue growth, despite having reached high utilisation levels, by optimising the planning and management of production and logistics processes. EBITDA rose by 27.1% to €127.3m. Management raised FY15 guidance to €623-633m revenues (previously €590m) generating a 23-24% EBITDA margin (previously 20%).

Strategy of high-end technology expansion
In the short to medium term, management’s focus is on maintaining margins at industry-leading levels. It is achieving this through sustained investment in technical capability, which enables it to supply high-end boards for mobile device, automobiles, healthcare and industrial applications. This is combined with a diverse geographic footprint providing high-volume capacity at an appropriate price point. Longer term, growth will be driven by entry into the IC substrate market through the construction of a €350m facility (fully funded) at its Chongqing site, which takes advantage of the lower cost base in China. Equipment characterisation and certification for the first production line continued during Q315. Negotiations about the product mix and the ramp scenarios have begun, with the intention of commencing volume production in CY16 with the first revenue streams of up to €200m forecast in 2016 and full revenue streams of c €400m in FY18.

Valuation: Trading at a discount to peers
The shares trade on forward EV/EBITDA multiples that are at a discount to the mean of our sample of listed printed circuit board manufacturers. Given the company’s superior margins and the long-term potential of the IC packaging substrate initiative, this discount does not appear justified.

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