10th Apr 2024 11:01
(Alliance News) - XP Power Ltd shares rose on Wednesday, on the back of a "reassuring" trading update, which saw the company back yearly expectations.
XP Power predicted trading to improve as demand in its semiconductor equipment unit starts to pick up.
Shares in the maker of power control systems rose 9.4% to 1,084.00 pence each in London on Wednesday.
XP Power said revenue in the first-quarter to March 31 fell 17% on-year to GBP64.6 million. It declined 15% at constant currency.
Order intake was 29% lower at GBP43.7 million.
"Sales and order intake in the Semiconductor Manufacturing Equipment sector were at a similar run-rate to that achieved in the second half of 2023. Sales and order intake in the Healthcare and Industrial Technology sectors slowed as customers continued to destock," XP Power said.
The Singapore-based firm's offering is used in sectors including renewable energy, water cleaning, industrial robotics and healthcare patient treatment.
XP Power left its annual outlook unchanged. Back in its March annual results, it predicted activity levels would "reduce" this year, after it achieved record revenue in 2023. At the time, it said it made moves to "lower our cost base accordingly".
The company said on Wednesday: "As expected, revenue in Q2 is likely to be slightly lower than Q1 due to ongoing customer destocking, and we continue to expect trading to improve during 2024 as channel stock levels reach equilibrium and as demand for Semiconductor Manufacturing Equipment begins to increase. Order intake in Q2 will provide greater clarity on the timing and trajectory of this improvement.
"We are confident that our market positions remain strong and that the group is well positioned to prosper as our key markets resume their trajectory of healthy long-term growth."
Analysts at Davy said the trading statement was "reassuring".
"Order intake looks to have stabilised in March, with continued lumpy destocking in Healthcare and broad destocking in Industrial Technology. Management is pulling all its cash levers, with Q1 net debt down GBP9 million quarter-on-quarter and cautious guidance of a H124 peak maintained. Encouragingly, end market mood music is improving. Q2 order intake will be key to timing the share price recovery; with the share price back at previous lows, sentiment remains at rock bottom," Davy analysts said.
Davy kept its price target for the stock at 2,530p and reiterated its 'outperform' rating. It sees "significant re-rating potential as financial metrics normalise in 2025".
The stock traded as high as 1,104.00p on Wednesday, around its best level since suffering a deep sell-off in February.
The stock slumped more than 35% on February 16 after it warned results for 2024 would be "significantly below market expectations".
"This is based on recent order intake, revenue performance and discussions with customers, particularly within the Healthcare and Industrial Technology sectors, which confirm unusual, temporarily soft demand conditions and destocking. These softer trends have also emerged within our direct industry peers," it explained at the time.
By Eric Cunha, Alliance News news editor
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