Melexis Earnings: Auto Soft Landing Expected; Capital Allocation Rating Upgraded to Exemplary

Narrow-moat Melexis’ fourth-quarter 2023 helped ease investors' concerns over a potential downturn in the automotive chip cycle. Revenue grew by 12% year over year and management guided for 3% to 4% growth in revenue during fiscal 2024. In line with other peers, Melexis expects a weaker first half of the year followed by a stronger second half, according to its conversations with customers. Inventory at distributors keeps decreasing, but at some point during the year they should start being replenished. Growth in 2024 should mainly come from volumes as management expects pricing to remain relatively constant. We maintain our EUR 100 fair value estimate with shares offering 20% upside.