VAT Group: Richly Valued Heading Into An Uncertain But Positive CapEx Investment Cycle

2025-03-09 14:56:29 ET

Summary

• VAT Group's outlook is positive due to expected CapEx spending on advanced memory and logic chips, though recent weak NAND pricing is an unwelcome development.
• Fourth quarter results showed mixed performance, with revenue growth but ongoing uncertainty in semiconductor valve orders and market conditions.
• VAT Group's long-term growth is driven by increasing vacuum intensity in chip production and VAT's near-monopoly position, and certain industrial markets like advanced energy could contribute more in the future.
• Valuation is high, and almost always is, but a forward P/E multiple consistent with past averages can support around 20% upside.

If you have a crystal ball, now would be a good time to try to tune it to whatever is going on with memory prices and where the prices of NAND in particular are headed. Prices have been rather weak to start the year, leading many producers to scale back their plans for production and reinvestment in CapEx, but the outlook for the second half of 2025 is relatively better and after years of weak CapEx spending in 2023 and 2024, NAND manufacturers are going to need to spend on equipment to make the move to 2XX chips....

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