Soitec Upgraded to 'Buy' by Kepler on Faster Turnaround Prospects

Analysts at Kepler Cheuvreux have upgraded their rating on French semiconductor materials manufacturer Soitec to 'Buy' from 'Hold', citing a business turnaround that is progressing more rapidly than previously anticipated. The brokerage noted improved growth prospects and better visibility, particularly in the company's Photonics-SOI division.

Analyst Action and Rationale

In its note to clients, Kepler Cheuvreux lowered its price target on Soitec to €150 from a previous €160. However, the firm stated that a material correction in the company's share price over the last two months has brought its valuation to more attractive levels, justifying the rating upgrade.

The positive reassessment is based on two key business segments showing signs of a faster-than-expected recovery. Kepler now anticipates significantly higher margins for Soitec beginning in fiscal year 2027.

Business Segment Outlook

Kepler highlighted favorable developments in Soitec's main product lines. The RF-SOI (Radio Frequency Silicon-on-Insulator) business appears to be bottoming out, while the Photonics-SOI segment is seeing accelerated growth.

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• RF-SOI Stabilization: Inventory depletion in this segment is progressing well, with foundry customer inventories falling by 300,000 wafers to 1.7 million in the first quarter of fiscal 2027, according to Kepler. The brokerage expects a return to normal inventory levels by the middle of fiscal 2027 and now projects only a slight sales decline for the unit in the fiscal year.
• Photonics-SOI Acceleration: Demand for Photonics-SOI is strengthening, supported by rapid capacity expansion and multi-year customer commitments that improve visibility. Kepler forecasts sales for this business will rise 172% to $290 million in fiscal 2027 and expand at a compound annual growth rate (CAGR) of more than 50% through fiscal 2031.

Revised Financial Forecasts

Reflecting the more optimistic outlook, Kepler Cheuvreux significantly adjusted its financial projections for Soitec in the medium term. The brokerage raised its sales forecasts by 14.2% for fiscal 2027 and by 10.4% for fiscal 2028.

Correspondingly, adjusted EBIT (Earnings Before Interest and Taxes) forecasts were increased by 27% for fiscal 2027 and by 54.2% for fiscal 2028. In contrast, Kepler lowered its adjusted EPS (Earnings Per Share) estimates for fiscal 2027 and by 55.4% for fiscal 2028, though the source did not specify the reason for the reduction.