Germany-based wafer supplier Siltronic (DE:WAF) reported a 16% decline in its 2023 sales (preliminary figures) to €1.51 billion amid weak demand in the semiconductor industry due to excess inventory in the supply chain. The company had estimated a 15% to 17% fall in its annual sales.
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Challenging Times for Siltronic
Companies have been optimizing their spending due to macro pressures, which has impacted the demand for tech products and, consequently, the demand for Siltronic’s wafers.
Siltronic’s EBITDA (earnings before interest, tax, depreciation, and amortization) declined to €434 million in 2023 from €672 million in the prior year. However, the company emphasized that despite a significant decline in its sales, it generated an EBITDA margin of 29%, which was within its targeted range of 28% to 30%.
A challenging business backdrop did not stop Siltronic from making significant investments to support future growth. The company’s capital investments increased 22.5% to €1.32 billion, mainly due to the building of the new 300 mm wafer fab in Singapore and the extension of the crystal pulling hall in Freiberg.
Consequently, the company reported a preliminary negative net cash flow of €664 million in 2023 compared to a negative cash flow of €395 million in the previous year. The huge capital expenditure, along with dividends of €90 million, led to a net financial debt of €356 million as of December 31, 2023.
Siltronic will announce its audited final results for 2023 on March 12, 2024.
Are Siltronic Shares a Good Buy?
Following the preliminary results, Jefferies analyst Constantin Hesse reiterated a Buy rating on WAF stock with a price target of €105. The analyst expects continued re-rating of Siltronic shares in anticipation of a possible recovery in the second half of this year.
With six Buys, one Holds, and two Sells, WAF stock earns a Moderate Buy consensus rating. The Siltronic share price target of €96.11 implies 7.3% upside potential. Shares have risen about 5% in the past year.
