Long Term, Chips, Technology, ASML

Don’t get lost, microprocessors are essential for long-term investment. The conflict in Israel has left ASML in the dark. Analysis, perspectives, valuation and recommendation for European technology company bonds.

ASML Holding European manufacturer of complex and critical lithography systems for the production of microchips. Headquartered in the Netherlands, it operates through its subsidiaries in the Netherlands, USA, Italy, France, Germany, United Kingdom, Ireland, Belgium, South Korea, Taiwan, Singapore, China, Hong Kong, Japan, Malaysia and Israel. .

Results

The technology firm has provided market figures that beat forecasts for the second quarter of 2023.. Thus, revenue reaches 6,902 million euros compared to the expected 6,687 million euros, gross margin 51.3% compared to the expected 50.60% and net profit 1,803 million euros compared to 1,803 million euros.

Predictions

For the current quarter, the third in 2023, ASML estimates that it will reach sales between 6,500 million euros and 7,000 million euros (expectation 6,511 million euros), 50% (expected vs. 51.3%). And looking ahead to 2023 as a whole, the company has improved on the figures reported last quarter and now expects to achieve revenue growth of +30% (vs. +25% previously) and improved margins. The order book remains strong at 38 billion euros, compared with sales of 26 billion euros in the last 12 months. In the second quarter of 2023, the order book will total 4.5 billion euros, of which 1.6 billion will come from Europe.

Based on long-term and various market scenarios, ASML aims to achieve annual sales of approximately 30,000 to 40,000 million euros by 2025, with a gross margin of approximately 54% and 56%. On the 2030 horizon, its projections are for annual sales of around 44,000 to 60,000 million euros, with a gross margin between approximately 56% and 60%.

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Business opportunities

A very relevant risk This comes from a regulation that tries to limit the sale of microprocessors from the Netherlands or the US to China, with ASML receiving 15% of its total revenue.

It has business in Israel and therefore could be affected by the potential escalation of this conflict in the Middle East. At this time, the impact is limited, but monitoring is advised. In 2Q23, sales in the EMEA region (Europe, Middle East and Africa) were 2% of the total.

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Its main advantages, a cutting-edge technology, difficult to copy, with the ability to continuously innovate thanks to growing demand and a strong balance sheet. The rise of artificial intelligence reaffirms the structural importance of this type of technology.

ASML Historical Citation

Basic assessment

In valuation of multiples and stock market rates And compared to competitors, ASML does not trade cheaply. The market pays a PER of 29.8v, with estimated EPS growth of +30%, which brings the PEG ratio to under-growth (0.78v). Sales multiple at 8.3v compared to sector average 5.66v for ASML and 34.7v for PCF, compared to its peers average of 20.5v. Dividend-yield profitability is around 1.14%, including a juicy share repurchase program ($22.8 billion in 2023 compared to $21.8 billion in 2022) that should positively impact shareholders through higher earnings per share.

Recommendation for ASML Bonds under basic assessment criteria Neutral For investment with long time horizon; Keep if in portfolio And wait until multiples are estimated for a better entry.

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