(News Bulletin 247) – The Isère company has lowered its annual outlook and anticipates declining sales for the 2023-2024 financial year, although it had previously forecast a stable turnover. This is due to inventory in the smartphone supply chain.

Soitec remains faced with the fall in the smartphone market, an industry which obviously consumes a lot of electronic components and which is currently experiencing a high level of stocks, with sales in sharp decline. At the beginning of November, Oddo BHF even indicated in a note that it expected half-year results “marked by massive destocking by customers in mobile communications”.

The design office was right. Soitec reported half-year results down sharply, by 15% at constant scope and exchange rates during the first half of 2023-2024 (from April to September), to 401 million euros.

“A severe correction in stock levels”

This decline in billings is in line with the group’s forecasts, which indicated in April, when publishing its 2022-2023 annual accounts, that its revenues would drop by 15% in the first half of 2023-2024. Remember that the group operates on a staggered financial year, closing its annual accounts at the end of March.

“The severe correction in the level of stocks of products dedicated to radio frequency applications for smartphones took place in the first half of 2023-2024 as anticipated,” explains Soitec in its press release. “This decline is mainly explained by the ongoing inventory clearance across the entire smartphone supply chain,” the company continues.

A little further down in the accounts, the gross operating surplus (Ebitda) also appears to be down, by 21% over one year, to 132 million euros. The corresponding margin follows the same path and crumbles to 33%, compared to 35.5% in the first half of 2022-2023. In terms of net profit, group share, it is also down, by 16% over one year to 80 million euros.

Oddo BHF expected Soitec to deliver annual outlooks “at risk given the lack of recovery in global smartphone sales”. Here too, the fears of the design office materialized.

“A transition exercise”

Under pressure, Soitec is therefore abandoning the objective of stable turnover over its entire 2023-2024 financial year ending at the end of March.

The semiconductor specialist’s turnover is now expected to decline by a percentage of approximately “mid-single digit” (around 5%, Editor’s note) at constant scope and exchange rates. The annual Ebitda margin is also revised downwards and is expected “around 35%”, and against a previous forecast “around 36%”.

“We note that the absorption of RF-SOI stocks (silicon substrates on insulators applied to radio frequency, editor’s note) by our customers will last longer than initially anticipated,” explained Pierre Barnabé, the general manager of Soitec . “After this year of transition, we will resume our growth trajectory,” said the manager.

Last June, the group confirmed its revenue objectives for the financial year ending in March 2026. The Isère company is now counting on a turnover of around $2.1 billion, an objective which had, let us recall , was lowered last April compared to a previous target of $2.3 billion, communicated in June 2022. The Ebitda margin target of 40% on the same date, was also confirmed in June.

The group is counting on a tripling of the size of addressable markets. Soitec cites strong growth in demand for semiconductors, greater penetration of innovative substrates and an expansion of the product portfolio.

The market gives up

On the Paris Stock Exchange, Soitec showed incredible resistance after this lowering of the annual outlook. The stock rose 2.1% to 167.64 euros around 1:50 p.m., after losing more than 5% in the first minutes of trading, time for analysts to comment on the latest results and the adjustment of Soitec’s annual forecasts.

Quoted by News Bulletin 247, UBS analysts estimate that the turnover and gross operating surplus for the first half of 2023-2024 “are in line with forecasts”.

“Forecasts for the 2024 financial year have been reduced slightly, but we believe the market will focus on the next financial year, which involves low to mid-single digit year-on-year growth,” adds the research firm, which is renewing at the same time his advice to buy the stock with a price target of 200 euros.