BESI (+) : LT targets raised ahead of CMD today

Research evidence excerpt

BESI (+) : LT targets raised ahead of CMD today

Refinitiv

Investment case, valuation and risks

Besi (Outperform, Target Price EUR320)

Investment case

Besi is a global leader in semiconductor packaging equipment and is uniquely

positioned in hybrid bonding, a prerequisite for future chip designs used in AI

applications. Historically, advancements in chip evolution and shrink were primarily

driven by front-end investments. With shrink reaching its limitations, focus is turning to

packaging, and specifically hybrid bonding, which could become a game changer for

Besi as it is increasingly moving into the front-end. Following increasing hybrid adoption

in smaller markets from 2021-25, we expect adoption in high-volume markets such as

HBM (starting with HBM4E) and smartphones to start in 2027, leading to an

acceleration in hybrid bonding related revenues.

Valuation methodology

We value Besi using a 50/50 weighted DCF and multiples approach using 7.4% WACC

in our DCF and a 45x 2027 EV/EBITA multiple (75% premium to ASML/ASM). At our

target price, Besi would trade on c. 40x 2027 EV/EBIT.

Risks

To the upside:

We see the following upside risks: 1) hybrid bonding adoption in HBM4/4E develops

faster than expected; 2) hybrid bonding demand in logic extends beyond AI compute (i.e.

mobile, ADAS, PC) faster-than-expected; and 3) the mainstream die-attach market

recovers faster than expected.

To the downside:

We see the following downside risks: 1) emergence of a viable competitor in hybrid

bonding as suppliers could demand a second supplier, lowering market share; 2)

delayed adoption of hybrid bonding in HBM5/6 by memory makers; 3) the mainstream

market remains weaker for longer, and 4) a viable solution for wafer-to-wafer hybrid

bonding is developed.