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Three scenarios - Trends-Tendances sur PC

Three scenarios – Trends-Tendances sur PC

Beyond the specter of rate hikes and a recession, the trade war between China and the United States, one of the stakes of which is the mastery of technologies, has weighed on chipmakers for years; ASML is for example not authorized to supply EUV machines to China. New US regulations further cloud the outlook.

Beyond the specter of rate hikes and a recession, the trade war between China and the United States, one of the stakes of which is the mastery of technologies, has weighed on chipmakers for years; ASML is for example not authorized to supply EUV machines to China. New US regulations further cloud the outlook. In the 1st half of 2022, ASML generated 16.9% of its turnover (Sales) in China. The ban on exports to the Middle Kingdom will therefore have repercussions on the sales of the Dutch group, although in the long term a part may be recovered, for example when the customers are in fact subsidiaries of American companies based in China who are relocating production. The strong internationalization of the sector and the interconnection of chains complicate forecasts. However, the chip market is structurally healthy and shows great potential for long-term growth, in particular because the United States, Europe and China wish to boost their national production of semiconductors, which will require the construction many well-equipped factories. Finally, ASML’s order book seems well stocked. Many uncertainties therefore weigh on the evolution of the action. Since we don’t have a crystal ball, we sketch out three scenarios. ASML is largely unaffected by the brief dip in the market as its order book is strong and chipmakers continue to invest in the latest technology. Turnover increased by just over 14% – much less than the average for the last five years (22.0%), but more than that of the last 10 (12.7%). Net profit margins are no longer as high as in 2021 (31.6%), but exceed the average of the past decade (23.6%) thanks to economies of scale and the group’s excellent positioning on the market. The price/earnings ratio (P/E) is 30, as in 2013-2018. The drop in turnover in 2023 is offset by machines delivered in 2022 but accounted for the following year (2.2 billion euros). Sales recover significantly in 2024 and 2025. Until 2024, margins are clearly down compared to those of 2021, but recover in 2025. At 27, the C/B ratio is just over 20% below the average for the past decade (34.2). Turnover fell by 16% in 2023 (as in 2012, the worst vintage since 2009), then by another 10% in 2024. In 2008 and 2009, it fell two years in a row for the last time, with a cumulative decline of 48 %. But in 2010, ASML sales had almost tripled and reached a new record, pulverizing that of 2007. Given the shortages of recent years, it is unlikely that chipmakers will again drastically reduce their investments, especially in state-of-the-art machinery. In 2023, ASML will also record 2.2 billion in sales made in 2022. In 2025, sales will start to rise again, but not as much as in 2010, and profit margins will recover. The C/E ratio falls to its lowest level in the last decade.

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