First up, then down - the cyclical nature of the semiconductor industry has caused widely fluctuating earnings for industry players. Domestic company Comet Holding learned this painfully in 2023. While the Flamatt-based company achieved record results in the previous year, business then slumped sharply. However, the cycle now appears to have bottomed out and the growth curve of the specialist in radio frequency and X-ray technology is pointing upwards again. Comet Holding CEO Stephan Haferl and CFO Christian Witt will provide a detailed insight into business development on Thursday, March 6. During the presentation of the annual results, at the Widder Hotel in Zurich.
Investors in the five-star hotel don't need to prepare themselves for unpleasant news. Comet already provided preliminary insight into the books at the end of January. After a drop in sales of almost a third in 2023, the turnaround began last year. According to as yet, unaudited results, sales increased by 12.1% to around CHF 445 million. "The growth in sales was driven entirely by the recovery of the semiconductor market," the company explains. However, the comeback did not proceed at the same speed across all segments. While demand for AI and high-performance computing (HPC) applications picked up, consumer-oriented markets such as smartphones and PCs as well as traditional industrial sectors, including the automotive industry, remained rather subdued.
Meanwhile, the profit side showed an even more dynamic upward trend. The EBITDA margin improved from 11.3% to 13.8%. However, the management had set itself somewhat higher targets here. Due to higher investments and a slightly unfavorable product mix, profitability fell short of expectations. Nevertheless, Comet is optimistic about the future. For the current year, the company expects the semiconductor industry to continue to recover, which should ultimately lead to further growth. The final quarter of 2024 offers hope in this regard. In the fourth quarter, sales soared by 27% to around CHF 143 million.
New projects at Comet are also expected to ensure future growth. For example, the Synertia HF matchbox was launched on the market last July and the first customer projects with bundled Synertia matchbox and HF generator modules were also started. This combination of devices ensures high-performance control and monitoring of plasma conditions at the highest speed level, which is required for the production of modern microchips. Key growth initiatives also include the further development of the CA20 semiconductor inspection solution, which is based on the Dragonfly software from IXS.
In total, Comet is active in around nine market segments. Most notably in the semiconductor and electronics market but also in the sectors of aerospace, automotive and security. The chip industry accounts for more than 70% of revenues. This is unlikely to change any time soon, as the production of high-performance semiconductors involves an increasing number of more complex production steps and these require ever more precise plasma control modules. This is precisely what Comet offers its customers. However, the company also sees opportunities in the automotive and aerospace sectors. In particular the increasing pressure on manufacturers, to introduce more efficient drives, could benefit the company.
Not only is the operating business picking up again after the end of the cyclical semiconductor downturn, the share price may also have bottomed out. Since the low of CHF 234 in January, the share price has risen by more than a tenth. However, there have been repeated upward spikes, meaning that the share price performance of the past three months in the one-year chart should be seen as a bottoming out between CHF 240 and CHF 280. However, analysts are not satisfied with this price level. The consensus forecast for the next 12 months is a price of CHF 346.
However, the Comet share does not have to take off to achieve an attractive return. The new Softcallable Barrier Reverse Convertible transforms even a sideways movement into a handsome return. The product offers a coupon of 8.60% p.a. with a maximum term of 18 months. This is guaranteed to be paid out quarterly on a pro rata basis. In order to get the nominal back in full at the end of the term, the underlying must leave the barrier intact. This is fixed at 59.00% of the starting price, which in turn corresponds to a comfortable risk buffer of 41.00%. Should the barrier nevertheless be touched, it depends on the final fixing. If the Comet share then returns to at least the starting level, the investment will achieve the maximum return despite the barrier being breached. In the case of the BRC, a soft call is observed for the first time after 6 months.
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