Investing.com -- Shares of BE Semiconductor Industries (AS:BESI) (BESI) were down on Monday after HSBC analysts raised concerns about downside risks, initiating a "reduce" rating on the stock with a target price of €95, representing a potential 15.3% downside from its previous price of €112.15 (as of September 18).
BE Semiconductor was trading 3.2% lower at 6:53 a.m. (1053 GMT) at €108.05.
This reflects HSBC's caution on growth expectations for BESI, particularly regarding demand for its hybrid bonding tools, a key driver of the company's future growth in semiconductor assembly equipment.
While BESI is well-positioned in the semiconductor assembly market, especially in hybrid bonding—a technology crucial for advanced semiconductor packaging—HSBC’s proprietary model suggests the demand for these tools may fall short of expectations.
“It is only likely to amount to around 150 tools by 2026 and around 480 tools by 2030, significantly below the company’s expectations for an installed base of 900-2,000 tools by 2030,” the analysts said. This discrepancy presents a potential risk of underperformance relative to market expectations.
HSBC also flagged concerns about BESI’s non-hybrid bonding segments, which cater to industries like automotive and mobile, comprising 59% of the company’s 2023 revenue.
Given uncertainty around demand recovery in these markets, HSBC expects revenue growth from these segments to be more conservative than previously anticipated.
HSBC's projections for BESI's 2025 financial performance are lower than the market consensus. While consensus estimates peg BESI's 2025 revenue at €929 million, HSBC forecasts it to be around €779 million, representing a 16% gap.
The brokerage also expects BESI's net income for the same period to be 23% lower than consensus estimates. As a result, HSBC has set a target price of €95, implying a downside risk of 15.3%, supported by a valuation of 27 times FY26 estimated earnings, in line with the stock's historical average P/E multiple.