2025-05-08-Jefferies-相干公司（COHR）_EML增长成为焦点_15页_519kb

EML Growth Comes into Focus - Summary

Core Content

Coherent (COHR) has demonstrated strong growth in its communications business, which has helped offset weakness in other areas and contributed to a top-line beat and raise. The company has emphasized its competitiveness in EML (Erbium-Doped Fiber Amplifier) and its ability to compete across the entire technology spectrum. Despite a mix shift towards DC (Data Center) transceivers, which may delay strategic profitability improvements, the overall demand for transceivers remains robust, especially in the context of the 800G transition. The company is also expanding its InP (Indium Phosphide) capacity and exploring opportunities in the CW (Continuous Wave) segment.

Main Points

• Revenue Growth:

  • March 2025: Revenue reached $1.498B, beating the consensus by 4%, with Communications contributing $897M (+10% Q/Q).
  • June 2025: Revenue guidance was above expectations at $1.50B, with Communications expected to rise Q/Q while Industrials and other markets are projected to decline.

• Gross Margin (GM):

  • GM improved to 38.5% in March 2025, slightly above the guidance of 38.0%, driven by higher revenue and GM expansion efforts, though affected by unfavorable mix.

• Operating Margin (OM):

  • OM improved to 18.6% in March 2025, outperforming the Street estimate of 17.7%, despite higher operating expenses.

• Earnings Per Share (EPS):

  • EPS came in at $0.91, above the Street estimate of $0.86.
  • Guidance for June 2025 EPS is also expected to be in line at $0.91.

• Segment Performance:

  • Communications: Strong growth in both Q/Q and Y/Y, with a significant portion of revenue coming from EMLs.
  • Industrials: Expected to be weaker, with a cautious tone in guidance for 2H.
  • Materials and Lasers: Slightly better than expected in March, with materials showing Y/Y growth due to demand for equipment in display and semi-capacity sectors.
  • Lasers: Slightly above, but faced Q/Q decline due to softness in the consumer electronics market.

• Strategic Actions:

  • The company is implementing cost-saving measures, including exiting the SiC (Silicon Carbide) module business, which provided no revenue.
  • A 6-inch InP line is expected to start production in September 2025, increasing internal EML production capacity.
  • The company is also exploring asset optimization, such as selling underutilized facilities.

Key Information

• Market Cap: $11.1B
• Price Target: $110 (up 58% from current price)
• 52-Week High-Low: $113.60 - $45.58
• Float: 96.3%
• Analyst Day: Scheduled for May 28, 2025 in NYC.

Investment Thesis

• The company is expected to generate $1.75 in incremental EPS from a combination of price optimization, discontinuance of DSP development, manufacturing outsourcing, ERP-driven cost savings, and better manufacturing overhead absorption.
• There is potential for further upside from divestitures of underperforming business lines and headcount reductions.

Scenarios

• Base Case: $110 (18x CY27 EPS of $6.23)
• Upside Scenario: $140 (22x CY27 EPS of $6.50)
• Downside Scenario: $75 (17x CY27 EPS of $4.50)

Sustainability

• Environmental Goals:
  • Achieve net-zero Scope 1 and Scope 2 GHG emissions from internal operations by FY'2040.
  • Obtain over 50% of global energy needs from renewable sources, mitigating over 175,000 metric tons of CO2 emissions.

Questions for Management

• How does Coherent approach carbon neutrality while maintaining profitability?
• How have diversity training initiatives impacted employee engagement?
• What are Coherent's short- and medium-term hiring goals related to diversity, equity, and inclusion?

Catalysts

• Potential divestiture of underperforming business lines.
• Better-than-expected transceiver business growth.

Revenue Breakdown

• Communications: Expected to grow significantly, comprising a large portion of total revenue.
• Industrials: Expected to decline, with a cautious outlook for the second half of the year.
• Electronics and Instrumentation: Moderate growth with some fluctuations.
• Materials: Slight growth in March, driven by demand for equipment in the display and semi-capacity markets.

Historical Performance and Estimates

• Historical Earnings Surprise: Coherent has historically shown positive earnings surprises, which have positively influenced stock reaction.
• New vs Old Estimates:
  • Revenue and EPS estimates have been revised slightly, with the new estimates generally in line with the Street consensus.
  • The company is projected to grow revenue and EPS in FY2025 and FY2026.

Figures and Data

• Figure 1: Results and Guidance for March and June 2025.
• Figure 2: New vs Old Estimates vs Consensus.
• Figure 3: Historical Earnings Surprise vs Stock Reaction.
• Figure 4: Forward P/E ratio.
• Figure 5: Historical Margins.
• Figure 6: Short Interest.
• Figure 7: Revenues by End Market.
• Figure 8: Revenues by End Market (% of Sales).
• Figure 9: Revenues by Segment.
• Figure 10: Revenues by Segment (% of Sales).
• Figure 11: Operating Profits by Segment.
• Figure 12: Operating Margins by Segment.
• Figure 13: Revenue Breakdown by Period and Segment.

Conclusion

Coherent is showing resilience in its communications business, particularly in the transceiver segment, which is driving overall growth. Despite challenges in the industrial sector, the company is implementing strategic cost actions and expanding its production capabilities. The company's long-term growth prospects are positive, with a clear path to improved profitability and sustainability goals. Analysts are optimistic about the company's future, with a price target of $110 and a range of scenarios reflecting potential upside and downside.