BWAC amd others on the board. Here is CSFB's summary comments as of today on the strong CYMI quarterly report of yesterday. I think it shows very well the "sentiment" presently existing in this sector.
<<The Allure is On
C1Q beat estimates. CYMI reported C1Q rev/pro-forma EPS $127.1mm and 44c versus our estimates of $121mm and 41c; cons. was $120.4mm and 42c. GAAP EPS included ~8c one-time gain in other income. Upside to our est. was driven by: (i) KrF upside (+6c) - Company shipped 70 units in 1Q (vs 63 installs and vs 48 units in C4Q) at an ASP of $970K; above our est. of 63 and $1.07mm; KrF 61% of units, vs 48% in C4Q; and (ii) GM Upside (+2c) – unit leverage drove GMs of 46%, 100bps above our estimate - about 5c of these gains were offset by higher tax rate and share count.
C2Q margins shine. Company guided C2Q rev to +5-10% q/q; mid-pt $136.7mm above our estimates at $126mm and 47c; consensus was at $128.4mm and 48c. Company guiding 2Q GM’s to 48-49% and reaffirming 4Q GM target of 55% was the key highlight from the call. We are revising CY06 rev/EPS from $504.5mm and $1.90 to $575mm and $2.36; cons was $525mm and $2.06. Our CY07 estimates go from $575mm and $2.55 to $667mm and $2.75. Although we have increased our GM est. for CY06 from 47.8% to 50.0%, EPS upside partially offset by higher tax rates (34% now versus 27.5% before).
2H shipments and margins. ASML’s commentary today will be key to ascertaining whether CYMI’s belief that DUV mkt can reach 350 units in CY06 is reasonable. Although company is confident of hitting 55% GMs by Dec, we are still modeling only 52% in 4Q - part of expansion will have to come from product mix driving price increases which may be harder to predict – but street may justifiably be a lot less skeptical of margin progression, post company’s solid results and guidance.
Valuation and outlook. We are revising our PT to $55 from $50, ~20x to CY07; and ~10% premium multiple to the group, justified given CYMI’s higher growth rates. Both LRCX and CYMI have provided 2H commentary that suggest 3Q orders could track flat to up versus down; likelihood of some companies at least being able to manage June order upside into Sep has increased. But note we have heard more from companies with better secular trends (LRCX - mkt shr, CYMI litho growth, TXN-wireless) – we have not seen complete picture on inventory, MPU and order trends. Although street sentiment is turning positive on foundry 2Q orders (we are not convinced foundries will increase ’06 capex), not clear to us if this helps 3Q/4Q order compares. Given these uncertainties, investors better off owning names that have strong alpha such as LRCX and CYMI; near term AMAT screens okay given leverage to fdry/DRAM customers. |
