AMS Osram - comment

We had expected bonds to trade off a little as we anticipated the weaker guidance but clarification on exit costs from the microLED project coupled with restating the underlying growth outlook for FY23 to FY26 of 6-8% CAGR has supported bond and equity levels. With no material upcoming maturities and a lack of any other near-term events, the large 10.5% coupon provides decent yield prospects.  

We are still going through the numbers but the slight move up in bond and equity prices feels more like relief than the underlying numbers. Revenue in Q1 was at the mid-point of guidance with EBIT slightly below guidance (lower capitalised R&D due to the cancellation of the microLED project). The planned divestments of €300-400m of non-core businesses have reduced marginally (by €50m) due to a lack of buyers, with one asset sale expected in the coming weeks. The balance, however, is postponed until FY25. Operationally, the hymn sheet stays the same, with strong growth in the Automotive sector, restocking continuing in industrial and medical segments and consumer markets showing belated signs of improvement. AMS Osram management continues to be cautiously optimistic on H2 24, but guidance for EBITDA in Q2 is lower than our model on the lower capitalised R&D.