LPKF Laser & Electronics SE [Frankfurt Xetra LPK] is a globally active technology company based in Garbsen near Hanover. As a laser specialist, LPKF has unique expertise in the fields of laser technology, precision mechanics and software.
The company continuously invests in the development of innovative processes to give its customers a competitive edge and open up new growth markets. leiming laser
LPKF is a very promising looking German tech company with a long pedigree going back to the mid-1970s, which also looks quite undervalued at the moment. Given its suite of intellectual property, LPKF should be a lot bigger than it is. The share price of EUR 9.2 looks cheap to be honest.
The stock price is still up 22% over the last six months, but it has lost some ground in January. We have seen a SMALL rally in the stock in the last couple of weeks. Technically speaking, while LPKF is trading just above EUR 9.1, there is scope here for a rally to much higher levels than this.
LPKF’s laser systems are critical to the development and production of printed circuit boards, microchips, automotive parts, solar modules and many other components. The company’s customers are producing ever smaller and/or more precise components. At the same time, they can increase the functionality of these components and take advantage of new design possibilities.
LPKF also offers solutions for the analysis of biological materials in the nanolitre range for pharmaceutical research. The LPKF glass foundry supplies customers from various industries with high-precision components made of glass.
The company reported in October that business development was gaining significant momentum. The order situation also looked extremely positive. LPKF holds up well when you benchmark it against the likes of Germany’s Brockhaus or Finland’s Detection Technology Oyj. These tech names simply do not have LPKF’s conservatively managed balance sheet.
Financials are looking excellent when compared with close peers in the space. Cash flow needs some improvement, but some of the developments mentioned below could address this. Cash flow numbers could be the drag factor here which is discouraging investors. Overall the LPKF balance sheet looks excellent though.
The order situation in the group has continued to develop well. At EUR 94 million, incoming orders after nine months were 28.6 % above the previous year. The order backlog rose from EUR 48.8 million in the previous year to EUR 76.2 million, of which approximately EUR 40 million is due for delivery in the fourth quarter.
“We are pleased with the good order development in the third quarter and are focused on managing the upcoming deliveries in the fourth quarter well “, said Dr Klaus Fiedler, CEO of LPKF. “In addition, we are pleased that the marketing campaign for the CellShepherd has started as planned.”
CellShepherd is the first product from the company’s new biotechnology product line called ARRALYZE and will be officially launched in the first half of 2024. It opens up a new and potentially very promising area of future revenues for the business.
LPKF is also looking ahead at the LIDE (Laser Induced Deep Etching) product segment. In September 2023, a leading global semiconductor manufacturer publicly declared its support for the future use of glass substrates, thus accelerating corresponding activities throughout the industry.
From LPKF’s point of view, LIDE technology is an important building block for the planned use of glass in high-performance chips. Since LIDE is already used in volume production in other application areas, LPKF considers itself well positioned here both technologically and operationally.
The LPKF board has already confirmed its forecast for the full year 2023 with sales of EUR 125 to 135 million and an EBIT margin of 3 to 7%.
In the medium term LPKF says it aims to achieve an attractive single-digit growth rate for its core business. In addition to the core business, the new business initiatives in the semiconductor, display and biotechnology markets are expected to contribute a total sales volume in the low three-digit million euro range in the medium term.
Based on the growth in sales and the resulting economies of scale, the board says it is aiming to achieve an attractive double-digit EBIT margin for the group over the coming years.
LPKF has the scope to get back to at least EUR 25 in my view. The management team tends to sound very cautious in their pronouncements on future growth, which does not inspire investors. The new business lines that it is rolling out this year do, however, look very exciting to me. I’m not buying it yet, largely because the stock needs to see some upside momentum first.
LPKF is worth keeping an eye on: the company’s annual report is due out on 21 March.
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