The Dutch semiconductor-equipment maker ASML posted net profit for the period of 1.82 billion euros, compared with EUR 1.77 billion for the fourth quarter of 2021, and consensus of EUR 1.68 billion polled by Bloomberg. Net sales came in at EUR 6.43 billion which is about the mid-range of its guidance and barely better than analyst consensus of EUR 6.38 billion. 

Gross margin for the three months was 51.5% compared with 54.2% a year earlier. The value of the fast shipments (EUR 3.1bn) was higher than expected into this year and bookings (EUR 6.3bn) brought book-to-bill close to parity, offsetting some of the investor fears into the print.

ASML plan to produce 60 EUV systems this year and 375 DUV systems. This means that ASML will see significant step-up in the 2023 sales numbers. Regarding the discussion around export controls, Wennink said nothing has really changed since the October regulations that came out of the U.S. «Any further speculation on what the outcome might be doesn’t help. We just have to wait for the governments and the politicians to keep talking and come to a reasonable solution,» said CEO Wennink. 

Valuation: ASML currently trades at 26.4x P/E 24E, below its 5-year historical average of 28.9x and above the MSCI EUROPE Semiconductors & Semiconductor Equipment Index (21.8x). On a 2024E EV/EBITDA basis, the stock is trading at 22x, below its 5-year average of 23x and above the MSCI EUROPE Semiconductors & Semiconductor Equipment Index (15.3x). On a P/S 24E basis, the stock is trading at 8.5x, above its 5-year average of 8.4x and above the MSCI EUROPE Semiconductors & Semiconductor Equipment Index (5.6x).                                                                                                                               

We reiterate our buy recommendation.

Management Outlook

ASML continues to see uncertainty in the market caused by inflation, rising interest rates, risk of recession and geopolitical developments related to export control. However, CEO Peter Wennink stated that ASML's customer indicate that they expect the market to rebound in the second half of the year. Considering the order lead times and the strategic nature of lithography investments, demand for ASML's systems remain strong. For 2023, management expects continued strong growth with a net sales increase of more than 25% and a slight improvement in gross margin, relative to 2022. ASML expect first-quarter net sales between EUR 6.1 billion and EUR 6.5 billion (consensus EUR 6.08 billion) with a gross margin between 49% and 50%. The lower-than-expected margin could be due to inflation and efforts to ramp up capacity.