Melexis Earnings: Strong Sales and Gross Margins; Auto Chip Supplies Keeps Improving

Melexis' second-quarter results are not surprising given several auto chip companies have already reported healthy results. Demand for auto chips remains steady and the chip shortage is improving. Second-quarter sales were EUR 237 million, at the higher end of the guided range, up 14% year over year and 4% sequentially. For the third quarter management expects sales to grow more than 4% sequentially (at the midpoint of third-quarter guidance). Management also upgraded its full-year guidance targets given the strong performance in the first half and expects a good performance for the remainder of 2023; it now expects sales to be up between 14% and 16% (previously 11% to 16%) with a gross profit margin above 45% and an operating margin of 27% (26% previously). We maintain our EUR 105 fair value estimate and see the shares as fairly valued as of Aug. 2.