1st Feb 2024 15:31
(Alliance News) - XP Power Ltd shares are being held back by fears that a bounce in semiconductor activity will not be forthcoming this year, though broker Davy believes investor concern is unfounded.
Shares in the company were 2.0% higher at 1,436.00 pence each in London on Thursday afternoon. It is down 41% over the past 12 months, though has enjoyed a year-to-date rise of 5.9%.
Still, shares in the Singapore-based manufacturer of power controllers are 39% off where they stood in late-September, before it warned it traded below expectations in the third-quarter of 2023.
Analysts at Davy commented: "We believe the XP Power share price has been held back by investor concern that the expected 2024 recovery in semiconductor activity and wafer fab equipment demand will be delayed into 2025. Recent industry news flow looks to dismiss this and confirm a steady H224 weighted recovery."
A demand recovery will be enough to send XP Power's revenue higher, and for the stock to achieve Davy's 2,550p price target.
It backed its 'outperform' recommendation, seeing "scope for further accelerated re-rating during the next six to nine months".
Davy noted investors are worried that a decline in 2024 adjusted earnings before interest, tax, depreciation, and amortisation could undo the balance sheet tidying up that a November GBP45 million equity raise did.
However, Davy believes a 10% increase in XP Power's adjusted Ebitda is possible this year, amid a "steady recovery in semiconductor/WFE demand".
Davy labelled XP Power's trading update in January as "somewhat reassuring".
It said revenue rose 9.0% to GBP316.5 million in 2023 from GBP290.4 million in 2022. Order intake declined 42% to GBP208.9 million from GBP362.9 million.
By Eric Cunha, Alliance News news editor
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