Good loading to ensure favorable development (Buy conf.)

– Strong 2Q14 confirms guidance – we stick to Buy: Following the strong set of 2Q14 (Sept) figures and the confirmed guidance, we are confident with our FY14 estimates. We confirm our Buy recommendation and raise our target price to EUR 9.2 (from EUR 8.8), owing to a shift of the detailed planning period in the DCF. 

– Positive shift in sales mix impacting further development: The shift of OEMs to technologically more sophisticated PCB solutions is an ongoing trend that should gradually continue and help AT&S offset future margin erosion from price pressure. In this respect, our estimates beyond 2014 could see positive revisions going forward.

– Guidance confirmed, our estimates, too: AT&S has confirmed its FY14 guidance of 5% revenue growth (to EUR 570mn) and an EBIT margin of 18-20% (EUR 102-114mn). While these figures seem to have a conservative touch, despite the extended holiday season in December and Chinese New Year in March, our estimates are already at the upper end. Hence, we see our estimates as well-backed for the moment, with some positive revision potential. 

– Loading favorable until November: As stated in the CC, loading is favorable in all plants until November. The stable capacity, with growing market demand, should ensure favorable loading going forward.

– Shift in DCF responsible for higher target price: Having shifted our detailed 5Y planning period to start with 2015 (March), the cumulated FCF in the planning period becomes positive, despite the huge investment program. This shift increases our target price, despite the fact that we are sticking to our estimates. 

– Book value of EUR 11 is our clear mid-term target.