VAT AG - hidden gem within uptrendVAT reported a decline in sales of 35% y/y and 14% Q/Q to CHF 128 million for Q1-19. Although order intake had also fallen compared to the previous quarter, the reported level and the sales target for Q219 would indicate a sideways trend in sales figures for Q2 19. Stock levels at equipment manufacturers appear to have normalised, as the items removed from consignment stocks appear to correspond to OEM equipment production levels. Although it is difficult to speak of reaching the bottom of the cycle when forecasting reliability is so low, especially on the storage market, the analyst believes that the stabilization of sales and the book-to-bill ratio are signs that the bottom is at least temporary. In addition VAT reported signs of renewed demand from OLED markets (for both larger and smaller panels), and projects for 2019 would emerge. Further market share gains likely. The development of new equipment for the 5nm node and next generation storage technology would continue despite the downturn. VAT reports numerous order wins in both semiconductor and display equipment. Based on the quarterly results, the analyst revised his sales for the business year 2019 down 4% and raised his sales forecasts for the business year 20/21E by 3% and 7% respectively. Due to various cost adjustment measures (lean manufacturing, relocation to Malaysia, implementation of an ERP, etc. ) and supply chain optimization, the analyst expects EBITDA margins to rise rapidly during the upswing. While Foeth reduced his EPS for the business year 2019 by 13%, he increased his estimates for the business year 2020/2021 by 8% and 12% respectively.
