Photon Control gets price target raised at Paradigm Capital

Photon Control (Photon Control Stock Quote, Chart, News: TSXV:PHO) posted sparkling numbers in its latest financial report, according to Paradigm Capital analyst Daniel Kim, who likes how the optical sensor company keeps gaining market share in the semiconductor capital equipment sector. Kim maintains his “Buy” rating in a May 10 report to clients with a raised target price of $2.75.

On Thursday, Vancouver-based Photon Control announced its Q1/18 results, which included record revenue of $13.9 million, an EBITDA of $4.7 million and basic EPS of $0.03 for the quarter.

“We continue to drive shareholder value by increasing revenue and net income,” said Scott Edmonds, Chief Executive Officer, in a press release. “Our first quarter results and our backlog growth reflect the shift in the semiconductor equipment market towards an increased adoption of Photon Control fibre optic sensors, and the results from investments made in the company.”

Edmonds added that Photon Control has committed $3 million towards a share buyback program and that they anticipate receiving approval for a jump from the venture exchange to the TSX very soon.

Kim says he expects revenue over the first half of 2018 to grow by 39 per cent year over year.

“PHO has a long track record and strong reputation in its core end markets. A reconstituted board and management team will leverage its collective deep industry experience and long-standing relationships with key customers to drive accelerated growth, particularly within the semiconductor capital equipment market, as it undergoes a massive investment cycle,” says the analyst.

Photon Control’s Q1 beat the Street’s estimates as well as Kim’s, which were $12.3 million/$3.5 million/$0.02 for revenue/EBITDA/EPS.

“PHO continues to benefit from growth in the semicap industry, and its renewed product portfolio and bolstered sales team have deepened penetration with key accounts and have opened new doors,” says Kim.

The analyst has upped his estimates for 2018 and 2019 to reflect PHO’s stronger-than-expected traction and market share gains and has applied a slightly lower 12.5x EV/EBITDA multiple (was 13.x, which was in line with PHO’s semicap peers) to his 2019 EBITDA forecast of $22.7 million (was $20.7 million), resulting in the new target price of $2.75 (was $2.60). The target represents a potential return of 36 per cent at the time of publication.