Nova Measuring Instruments Ltd

NVMI : NASDAQ : US$11.60
BUY  Target: US$15.00


Nova Measuring Instruments is an Israel-based manufacturer of optical metrology equipment for the semiconductor industry. The company manufacturers both integrated and stand-alone tools and has achieved process tool of record in numerous applications for both types of systems.

Sustainability — Energy & Power Technologies STRONG OUTLOOK ON CONTINUED GROWTH IN FOUNDRY 

Investment recommendation We reiterate our BUY on NVMI as the leader in integrated optical metrology with share gains in its stand-alone systems. Investment highlights  Nova printed a strong quarter. Guidance was also very strong and above consensus. For Q1 the company is expecting revenues in the range of $33M to $35M compared to our estimate of $31M and consensus of $30.6M. Non-GAAP EPS is expected to be in the range of $0.19 to $0.23 compared to our estimate and consensus of $0.18.  The company is currently benefitting from the strength in foundry spending, particularly from top customer TSMC, and the ramp of its 20nm process. Nova is dominant in integrated CMP and gaining share in back-end etch at TSMC. Order trends suggest growing share with other foundries as well.  Nova remains well positioned in memory although this segment is generally less capital intensive for OCD metrology. Positively, the company noted that it is in evaluation with all of the leading VNAND companies. We believe that additional memory wins could certainly provide incremental growth, but most of this year’s strength should still come from foundry spending.  There is the potential for an air pocket in foundry in the middle to back half of the year as TSMC appears to be the only foundry investing heavily for 20nm. However, we expect a quick rebound in foundry CAPEX driven by the even more intensive 14/16nm investment later this year. We expect Nova to maintain its momentum in this node as well, backed by significant bookings – we highlight that 20% of Q4 orders were already for 1X nm nodes.


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