Soitec Earnings: Flat Sales Outlook for 2024; Weak Smartphone Market Offset by Automotive, Devices

Soitec SOI closed its fiscal 2023 (ended March 30) on a positive note, with sales for the fourth quarter up 16% at constant exchange rates and sales for the full year up 19%, in line with guidance. EBITDA margin for the full year came in at 36%, also in line with guidance. For fiscal 2024, sales are expected to remain flat on an absolute level, with a 15% decline in the first half of 2024 followed by a strong recovery in the second half. We are maintaining our EUR 190 fair value estimate and expect to make no or only minor adjustments to it when we revisit our model. Our medium-term sales and EBITDA margin forecasts remain more conservative than management’s targets, given the uncertainty brought by the macroeconomic environment and the semiconductor cycle change expected in 2023 (global semiconductor revenue is expected to decline 11% in 2023, according to Gartner).

The smartphone market grew 10% organically in fiscal 2023, but it will be Soitec’s main drag during the next 12 months. Smartphone inventories are high and need to be reduced, which will weigh on production of new phones and therefore new orders for chips. Management expects the smartphone inventory correction to last for the next two quarters. Soitec is inevitably exposed to the ebbs and flows of the smartphone market, but most of its growth comes from increasing silicon-on-insulator content per smartphone, giving support to long-term sales growth. In the automotive segment, sales increased 77% year over year, also driven by higher semiconductor content per car, as several automotive semiconductors use silicon-on-insulator technology. Demand for smart devices (edge computing, sensing, data centers) is expected to also grow nicely in fiscal 2024.