HSBC initiated coverage of Soitec shares on Thursday, with a Buy recommendation and a price target of €229, representing potential upside of almost 65%.

In a study of European chip specialists, the broker points out that the specialist in innovative substrates for the semiconductor industry benefits from solid growth drivers, which should enable it to increase its Ebitda by an average of 31% over the 2024-2027 period.

After an expected 11% decline in sales in the 2023/2024 financial year, the broker anticipates sales growth of 15% in 2024/2025.

He adds that with Enterprise Value/Ebitda ratios of 14x and 9x respectively for the next two financial years, the stock is trading below its five-year average of 16x, an undemanding level which he believes suggests potential for revaluation once market sentiment improves.

On the one hand, headline BOP of $7.4bn was a clear beat vs consensus of $7.1bn,

Usefully, management now guiding to at least 10% EPS CAGR for 2023-25, which we believe would imply very modest upgrades (c.3-4%) to current company-consensus.

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