VAT Group Leaving The Market Breathless As Vacuum Valve Demand Soars

 

When it comes to evaluating the performance of Swiss semi capex component maker VAT Group (VACNY) (VACN.S) since my last update, the closest I can come to criticism is that a very few stocks (like Applied Materials (AMAT) have done better, but the roughly 100% increase in the share price has nevertheless been way more than I expected back in October of 2020.

VAT Group has continued to see strong order inflow for its vacuum valves, and the biggest near-term challenge for the company is likely to be keeping up with demand. Adding too much capacity in the good times has long been an issue in the semiconductor space, and a source of cyclical volatility for the equipment makers, but this cycle could be different. Fabs are scrambling to add capacity, but equipment vendors can only do what they can do, pushing some demand off into 2022. Beyond that, new sources of demand like autos and IoT and more intense production processes (requiring more tools/equipment at each step) could drive better long-term growth with less cyclicality than in the past.

Much as I have liked VAT Group for some time, I didn't expect this blazing run over the past 10 months, and I'm not going to pout and take an Eeyore-like stance that the market is just being unreasonable. That said, a forward revenue multiple of around 10.5x on FY'22 revenue isn't exactly conservative (about a 12% discount to ASML (ASML), and neither are the revenue, EBITDA, or FCF growth expectations built into the share price now.

 

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VAT Group Leaving The Market Breathless As Vacuum Valve Demand Soars