STMicroeletronics among the few positive blue chips thanks to the 2021 accounts and the 2022 outlook beyond expectations. In fact, the share rises by 1.38% to € 40.39 against a falling market (Ftse Mib index -0.46% in points). In the fourth quarter of last year, the Italian-French group recorded a net profit up to $ 750 million from $ 582 million in the same quarter of 2020. Net revenues also grew by 9.9% year on year to $ 3.566 billion. While in sequential terms they increased by 11.2%, 140 basis points above the highest level of the company’s guidance. At the divisional level, the greatest growth is linked to the automotive (ADG + 29% year on year) and industrial (MDG + 24%) business, while personal electronics is down (AMS -11% year on year).
“In the automotive sector we have seen unprecedented demand in all geographic areas”, highlighted the president and CEO, Jean-Marc Chery, during the conference call to present the accounts, specifying that “the current visibility is over 18 months”. As for the industrial sector, “we saw strong demand during the year. In this market too, electrification and digitalisation are the main drivers of the increase in semiconductor content”.
Gross profit for the quarter improved 28.3% to 1.61 billion with a gross margin of 45.2%, +640 basis points year-over-year, 20 basis points above the highest level of guidance thanks the best product mix, favorable prices and production efficiencies. Operating profit also increased in double digits: + 34.8% to 885 million. Year-over-year, operating margin grew 460 basis points to a record high of 24.9% of net revenues compared to 20.3% in the fourth quarter of 2020.
At the end of the fourth quarter, inventories stood at 1.97 billion, up from 1.84 billion in the same quarter of the previous year. As for free cash flow, it dropped to 314 million from 512 million in the same quarter of 2020 after distributing cash dividends for 60 million and after the buy-back of treasury shares for 86 million. At the end of 2021 the group’s net financial position was 977 million compared to 798 million as of 2 October 2021 with total liquidity of 3.52 billion and financial debt of 2.54 billion.
STM has kept its promises. “As announced on January 7, 2022, our net revenues and gross margin for the fourth quarter of 2021 were better than expected, mainly thanks to better-than-expected operations in a market that continues to be dynamic,” said Jean- Marc Chery. “Net revenues for the fourth quarter of 2021 were 9.9% higher than those of the fourth quarter of 2020, with a further increase in profitability: the operating margin improved to 24.9% compared to 20.3% and the profit net reported a progress of 28.9% “.
Net revenues for the year 2021 grew by 24.9% to $ 12.76 billion, “as a result of strong performance in all the end markets we target (41% was from the Americas, 34% from Asia Pacific and 25% from the EMEA area, ed) and the programs already underway with our customers throughout the year. The operating margin increased to 19% compared to 12.9% in 2020 and net profit grew 80.8 percent “to 2 billion, Chery added.
Based on these numbers, for the first quarter of this year, ending April 2, management expects net revenues of $ 3.50 billion (consensus estimate of 3.3 billion) as an intermediate value, corresponding a year-on-year growth of 16.1% and a decrease of 1.6% compared to the previous quarter, plus or minus 350 basis points, and a gross margin of around 45% (42% the consensus estimate), plus 200 basis points or less. “We should be able to keep our gross margin at current levels, obviously with different seasonality between the various quarters” in the course of 2022, specified the CEO. A forecast that is based on an exchange rate of approximately $ 1.15 equal to 1 euro for the first quarter of 2022 and includes the impact of existing hedging contracts. A prediction that implies,
While for the year 2022, management expects to invest between $ 3.4 billion and $ 3.6 billion (consensus estimate 2.3 billion) in capital expenditures “to further expand our manufacturing capacity. and support our strategic initiatives, including the first industrialization line of our new 300mm silicon wafer plant in Agrate Brianza, “explained Chery. Based on strong demand from the group’s customers and increased production capacity, “we will lead the company based on a 2022 revenue plan of between $ 14.8 billion and $ 15.3 billion,” he said. specified the top manager, with the mid-point (+ 18% year on year) about 5% above the consensus estimate, according to Equita.
In particular, the 3.4-3.6 billion capital expenditure plan for this year is aimed at further increasing production capacity and supporting the group’s strategic initiatives. “Our capex plan,” explained the CEO, “includes 2.1 billion for capacity increases and mix changes in our manufacturing presence and 900 million for strategic investments, including the first industrialization line of our new wafer plant. of 300 mm silicon in Agrate Brianza. The remainder covers the maintenance and efficiency improvements of our production activities and infrastructures and our Carbon Neutrality implementation program “, a key element of the group’s sustainability strategy:”
The gross margin consensus for 2022 is 42.5%, so a 43% -44% indication without changing the opex estimate would imply an improvement in earnings per share estimates of 15% -20%, according to Equita’s calculations. With the STM stock trading at a 2022-2023 price / profit multiple of 17.3x-15.5x against a historical average of 17x, Equita maintained its hold rating and target price of € 46 on the share. Instead, Kepler Cheuvreux confirmed the buy rating and the target price at 54 euros, as reported by the agency Mf-DowJones, in the face of a “strong” and above expectations “fourth quarter” 2021, of a “guidance for the first quarter and the whole of 2022 well above expectations “such as that on investment expenses”
Citi also recommends buying the share with a target price of 53 euros. “STM surprised by also providing revenue guidance for 2022. In addition, the revenue estimate and gross profit for the first quarter of this year show no seasonality and are significantly higher than consensus forecasts. We believe investments higher indicate stronger growth in the future, “reads the Citi note which points out:” surely they are indicative of management’s confidence and visibility in future growth. The bears could say that the company is investing excessively close to the market peak. , but we remain confident in final market demand which grows and leads to softer cyclical pressures, so they consider the efforts of the
Accumulating STM shares in portfolio (target price at 46 euros), continues to advise Banca Akros, arguing that the accounts for the fourth quarter of 2021 were good as expected and appreciating the estimates for the first quarter of 2022, higher than those of the consensus, with a strong year-over-year growth in gross margin “which bodes well for full-year profitability. Revenues for the full year 2022, higher than expected, are largely explained by the increase in investments, but the general feeling and very positive and should provide fuel for further robust growth in fiscal 2023: the consensus currently only expects + 6.5% “, Banca Akros specified.
“STM reported a stronger than expected set of results, but above all it offered guidance and an outlook on 2022 revenue well above expectations”, echoed another analyst, noting that the results reflect strong performance across all outlet markets (30% automotive, 30% industrial, 25% personal electronics, 15% comm. equipment & others) and specific programs with customers. Likewise, “the 2022 guidance benefits from continued strong customer demand and increased capacity, as visible from the capex which include the industrialization of the 300mm Agrate factory. We estimate that 2022 may experience an ebit. reasonably adjusted to 3.4 billion, or 20% more than the current consensus forecasts “, concluded the analyst. STM will hold Capital Markets Day on 12 May. (All rights reserved)

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