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1. Company Snapshot

1.a. Company Description

VAT Group AG, together with its subsidiaries, develops, manufactures, and supplies vacuum valves in Switzerland, rest of Europe, the United States, Japan, Korea, Singapore, China, rest of Asia, and internationally.The company operates through two segments, Valves and Global Service.The Valves segment offers vacuum valves for the semiconductor, displays, photovoltaics, and vacuum coating industries, as well as for the industrial and research sectors.


The Global Service segment provides spare parts, repairs, and upgrades, as well as support services.It also offers gas inlet valves, multi valve modules, vacuum chambers with integrated valves, motion and mechanical components, and edge-welded metal bellows.VAT Group AG was founded in 1965 is headquartered in Sennwald, Switzerland.

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1.b. Last Insights on VACN

VAT Group AG faced challenges recently, with its share price experiencing significant movement. The company's fundamentals appear robust, but short-term headwinds may be impacting investor sentiment. A recent report raised questions about the temporary nature of the stock's weakness, suggesting that underlying strengths could potentially offset current difficulties. No recent earnings release data was available to assess the immediate impact on the company's financials. Ratings and share buyback activities were not mentioned in the provided updates.

1.c. Company Highlights

2. VAT Group Delivers Strong 2024 Performance with Record Metrics and Strategic Expansion

VAT Group reported a stellar financial performance in 2024, marked by significant revenue growth and robust profitability. The company achieved a 22% increase in sales, reaching CHF 1.5 billion, driven by a surge in semiconductor orders, which climbed 84% year-over-year. Gross profit margins expanded to 66.4%, while EBITDA margins rose to 31.2%, reflecting strong operational efficiency. Net income grew 11% to CHF 212 million, despite a slight decline in free cash flow to CHF 183 million due to higher working capital requirements. Capital expenditures totaled CHF 56 million, focusing on strategic projects in Malaysia and Haag.

Publication Date: Mar -07

📋 Highlights
  • Rebranding and Strategic Evolution:: VAT introduced a new brand and corporate design to mark its 60th anniversary, reflecting its evolution beyond core valve businesses. The rebranding includes a new website and underscores the company's strategic shift toward broader market opportunities.
  • Semiconductor Growth and Market Share Gains:: Semiconductor orders surged 84% and sales grew 22% in 2024, with VAT gaining 2 percentage points of market share. The company secured a record 132 spec wins, positioning it for future growth despite near-term geopolitical and market uncertainties.
  • Financial Resilience and Margin Expansion:: VAT delivered strong financial performance with order intake exceeding CHF 1 billion, gross profit margins of 66.4%, and EBITDA margins of 31.2%. Despite adverse FX effects and elevated R&D spending, the company maintained a solid balance sheet with a net debt-to-EBITDA ratio of 0.3x.
  • Long-Term Growth Drivers:: Management highlighted significant growth potential from the semiconductor market's expansion, driven by advanced technologies like 2-nanometer nodes and AI adoption. VAT is well-positioned to benefit from increasing demand for advanced chips and investments in solar, nuclear, and fusion technologies.
  • Capacity Expansion and Operational Efficiency:: VAT expanded its manufacturing footprint with new facilities in Malaysia and Romania, boosting capacity beyond CHF 2 billion. The company also completed its Penang 1B Innovation Center and remains focused on automation and operational efficiency to support future growth.

Operational Highlights and Strategic Initiatives

VAT made significant strides in expanding its manufacturing footprint, with the successful ramp-up of its Malaysian plant and the commencement of operations in Romania. These expansions are part of the company's strategy to enhance capacity beyond CHF 2 billion, with a strong emphasis on automation and innovation. The implementation of a new ERP system in Switzerland has already yielded positive results, boosting factory output beyond pre-ERP levels. Additionally, the Penang 1B Innovation Center is set to open in May, further solidifying VAT's position as a leader in semiconductor equipment manufacturing.

Future Outlook and Growth Drivers

Looking ahead, VAT is poised to capitalize on the growing demand for advanced semiconductor technologies, particularly in areas such as 2-nanometer nodes and beyond. Urs Gantner, CFO, emphasized the company's long-term growth potential, stating, "The semiconductor market's expansion and technological advancements will drive VAT's future growth." The company expects wafer fab equipment spending to reach $150 billion by 2030, positioning VAT to benefit from leading-edge technologies and increasing demand for advanced chips fueled by AI adoption. Despite short-term market volatility, VAT anticipates significant growth in 2025, with higher revenues, EBITDA margins, net income, and free cash flow.

Valuation Considerations

From a valuation perspective, VAT's current price-to-earnings (P/E) ratio of 51.64 reflects high investor expectations for future growth. The price-to-book (P/B) ratio of 13.71 indicates a premium for the company's strong balance sheet and growth prospects. With an enterprise value-to-EBITDA (EV/EBITDA) ratio of 29.2, the market is pricing in significant growth potential, supported by VAT's leadership in the semiconductor industry and its strategic investments in innovation and capacity expansion.

3. NewsRoom

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A Look At The Intrinsic Value Of VAT Group AG (VTX:VACN)

Dec -02

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While institutions invested in VAT Group AG (VTX:VACN) benefited from last week's 12% gain, retail investors stood to gain the most

Sep -23

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Will Weakness in VAT Group AG's (VTX:VACN) Stock Prove Temporary Given Strong Fundamentals?

Aug -27

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Is Now An Opportune Moment To Examine VAT Group AG (VTX:VACN)?

Jul -31

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VAT Group AG (VACNY) Q4 2024 Earnings Call Highlights: Record Spec Wins and Strong ...

Apr -21

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VAT Group Full Year 2023 Earnings: EPS Beats Expectations

Mar -07

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Under The Bonnet, BELIMO Holding's (VTX:BEAN) Returns Look Impressive

Feb -29

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Bell Food Group's (VTX:BELL) Returns Have Hit A Wall

Jan -19

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4. Business Breakdown

4.a. Revenues by Country

4.b. Revenues by Segment

5. Expected revenues mid-term growth (5.75%)

6. Segments

Valves

Expected Growth: 4.65%

Valves from VAT Group AG's 4.65% growth is driven by increasing demand from the semiconductor industry, expansion in emerging markets, and strategic acquisitions. Additionally, the company's focus on innovative products, such as vacuum valves and customized solutions, has contributed to its growth. Furthermore, VAT's strong distribution network and long-term relationships with key customers have also supported its revenue expansion.

Global Service

Expected Growth: 10.27%

VAT Group AG's Global Service segment growth of 10.27% is driven by increasing demand for digital tax compliance, expansion into new markets, and strategic acquisitions. Additionally, the company's investment in technology and process automation has improved operational efficiency, enabling it to capitalize on the growing need for VAT compliance services.

7. Detailed Products

VAT Calculator

A software solution that helps businesses calculate Value-Added Tax (VAT) accurately and efficiently.

VAT Compliance

A comprehensive service that ensures businesses are VAT compliant, including registration, filing, and payment.

VAT Audit and Consultancy

Expert consultancy services to identify VAT savings opportunities, optimize VAT processes, and ensure VAT audit readiness.

VAT Training and Education

Customized training programs and workshops to educate businesses on VAT regulations, compliance, and best practices.

VAT Automation Tools

Automated tools and software that streamline VAT processes, including invoicing, reporting, and compliance.

8. VAT Group AG's Porter Forces

Forces Ranking

Threat Of Substitutes

The threat of substitutes for VAT Group AG is moderate, as there are some alternatives available in the market, but they are not very attractive to customers.

Bargaining Power Of Customers

The bargaining power of customers is low, as they have limited options and are not very price-sensitive.

Bargaining Power Of Suppliers

The bargaining power of suppliers is high, as they are few in number and have a strong negotiating position.

Threat Of New Entrants

The threat of new entrants is low, as there are significant barriers to entry and high capital requirements.

Intensity Of Rivalry

The intensity of rivalry is moderate, as there are several competitors in the market, but they are not very aggressive in their pricing and marketing strategies.

9. SWOT Analysis

Strength

Weaknesses

Opportunities

Threats

10. Capital Structure

10.a. Balance Sheet

10.b. Weighted Average Cost of capital

Value
Debt Weight 21.49%
Debt Cost 3.95%
Equity Weight 78.51%
Equity Cost 10.18%
WACC 8.84%
Leverage 27.38%

11. Quality Control: VAT Group AG passed 7 out of 9 key points

12.a Historical Valuation

12.b Price/Earnings Ratio

12.c Margin Valuation

12.d Peers Valuation

Peers Group Analysis

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Rational

A-Score: 4.7/10

Value: 1.4

Growth: 6.4

Quality: 8.8

Yield: 2.5

Momentum: 1.5

Volatility: 7.3

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Interpump

A-Score: 4.5/10

Value: 4.0

Growth: 6.4

Quality: 6.8

Yield: 1.2

Momentum: 4.0

Volatility: 4.7

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Spirax-Sarco Engineering

A-Score: 4.4/10

Value: 2.2

Growth: 5.2

Quality: 5.4

Yield: 3.1

Momentum: 5.0

Volatility: 5.7

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Beijer Ref

A-Score: 4.4/10

Value: 2.4

Growth: 8.7

Quality: 5.5

Yield: 1.2

Momentum: 3.0

Volatility: 5.7

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Interroll

A-Score: 4.0/10

Value: 2.0

Growth: 4.7

Quality: 7.4

Yield: 2.5

Momentum: 4.0

Volatility: 3.7

1-Year Total Return ->

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VAT Group

A-Score: 3.5/10

Value: 0.2

Growth: 5.7

Quality: 7.9

Yield: 3.1

Momentum: 1.5

Volatility: 2.7

1-Year Total Return ->

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Peers Metrics

12.e Scoring Insights

12.f DCF BETA

Parameters

Short Term Growth

Short term Time

Long-Term Growth

WACC

Target Price

391.0$

Current Price

391$

Potential

-0.00%

Expected Cash-Flows