What To Expect From Coherent In One Chart

| About: Coherent, Inc. (COHR)

Summary

Coherent recently announced EPS of $2.57, which beat by $0.81, and revenue of $346.1M (+81.9% Y/Y), which beat by $29.12M.

OLEDs and Advanced Semiconductor Packaging are two of the strongest sectors in the microelectronics market, and Coherent is a dominant supplier of lasers for both markets.

Nearly 55% of Coherent’s revenues come from the microelectronics market, and 58% of shippable backlog related to flat panel display applications.

Coherent (NASDAQ:COHR) makes Specialty Lasers and systems and commercial lasers and components for microelectronics, scientific research and government programs. But here's the key. In its Q4 2016 earnings call on Nov 2, 2016, Kevin Palatnik, Coherent's Executive Vice President and Chief Financial Officer, noted:

"Net sales for fiscal fourth quarter of $248.5 million is a record for the company. This is an increase of $29.7 million or approximately 14% sequentially. $27.7 million of Q4 sequential increase was in the microelectronics market primarily driven by FPD applications."

In other words, 93.3% of the revenue growth of $29.7 million came from its Microelectronics Market Application.

Even more importantly, in its Q1 2017 earnings call on February 5, 2017, CFO Palatnik reported:

"The shippable backlog defined as shippable within the next 12 months is approximately $824 million. This includes $482 million or approximately 58% of shippable backlog related to flat panel display applications. The comparable shippable backlog at the end of fiscal fourth quarter was $605 million of which $382 million or approximately 63% was related to flat panel display applications."

The main focus of Coherent's flat panel display laser system is the ability to convert amorphous silicon into low temperature polysilicon (LTPS) used as the backplane of LCDs and OLEDs. Details of this excimer laser annealing (ELA) technology are described in an article entitled "Testing the Limits of Excimer Lasers: Annealing for Advanced Displays," written by Coherent personnel.

Coherent produces the laser and optical subsystems found in display ELA, but actual systems, which incorporate the laser, are produced by Advanced Process Systems Corporation, an integrator in the flat panel display market based in South Korea, and Japanese Steel Works, Ltd., an integrator in the flat panel display market based in Japan.

LTPS backplanes dominate the smartphone and are moving into larger displays for tablets and notebooks. While LTPS backplanes are used in LCD displays, the industry trend is a migration of LCD displays to OLED displays for smartphones, which will be a strong driver for Coherent's excimer lasers. I discussed the growth of the OLED display market in a May 24, 2016 Seeking Alpha article entitled "Applied Materials (NASDAQ:AMAT) Stock Bounced On Display Orders - But Is It Sustainable?"

If we look at the chart below, all OLED production lines for mobile applications use LTPS backplanes. Equipment orders for each of these production lines are shown in the last column, and corroborates the past growth in Coherent's microelectronics revenues and current laser backlogs.

Company/

Factory

Phase

Tech.

Gen.

App.

Type

Equipment

Order

JDI

TMD

2

LTPS

6

Mobile

Rigid/flexible

3Q 2015

MobaraJ1

2

LTPS

6

Mobile

Rigid/flexible

2Q 2017

JOLED

JOLED2

1

Oxide

8

IT

Rigid/flexible

4Q 2017

Sharp

Sakai

1

LTPS

6

Mobile

Rigid/flexible

1Q 2017

2

LTPS

6

Mobile

Rigid/flexible

1Q 2018

Tianma

Shanghai

1

LTPS

5.5

Mobile

Rigid

1Q 2015

2

LTPS

5.5

Mobile

Rigid/flexible

2Q 2016

Wuhan

1

LTPS

6

Mobile

Rigid/flexible

2Q 2016

2

LTPS

6

Mobile

Rigid/flexible

2Q 2017

Truly

HuizhouB

1

LTPS

4

Mobile

Rigid

1Q 2015

2

LTPS

4

Mobile

Rigid/flexible

4Q 2016

Visionox

Kunshan3

1

LTPS

5.5

Mobile

Rigid

Production

2

LTPS

5.5

Mobile

Rigid

4Q 2016

VSXGu'an

1

LTPS

6

Mobile

Rigid/flexible

3Q 2017

EDO

Shanghai1

1

LTPS

4

Mobile

Rigid

Production

2

LTPS

4

Mobile

Rigid

Production

3

LTPS

4

Mobile

Rigid

Production

Shanghai2

1

LTPS

6

Mobile

Rigid/flexible

3Q 2017

2

LTPS

6

Mobile

Rigid/flexible

3Q 2018

BOE

B7

1

LTPS

6

Mobile

Rigid/flexible

2Q 2016

2

LTPS

6

Mobile

Rigid/flexible

3Q 2017

3

LTPS

6

Mobile

Rigid/flexible

2Q 2017

CSOT

CSOTT4

1

LTPS

6

Mobile

Rigid/flexible

4Q 2017

AUO

L4B

1

LTPS

4

Mobile

Rigid

Production

LG Display

AP2-E2

1

LTPS

4

Mobile

Rigid

1Q 2015

2

LTPS

4

Mobile

Flexible

1Q 2015

3

LTPS

4

Mobile

Flexible

1Q 2015

4

LTPS

4

Mobile

Flexible

1Q 2015

AP2-E5

1

LTPS

6

Mobile

Rigid/flexible

4Q 2015

2

LTPS

6

Mobile

Rigid/flexible

3Q 2016

3

LTPS

6

Mobile

Rigid/flexible

2Q 2017

P9-E6 G6 OLED

1

LTPS

6

Mobile

Flexible

3Q 2016

2

LTPS

6

Mobile

Flexible

4Q 2016

3

LTPS

6

Mobile

Flexible

4Q 2017

M2-E4-1

1

Oxide

8

TV

Rigid

Production

M2-E4-3

1

Oxide

8

TV

Rigid/flexible

2Q 2017

P9W OLED E4-2

1

Oxide

8

TV

Rigid/flexible

1Q 2016

Samsung Display

A1

1/2/3

LTPS

4

Mobile

Rigid

Production

A2

1/2

LTPS

5.5

Mobile

Rigid

Production

3

LTPS

5.5

Mobile

Rigid/flexible

Production

4/5/6

LTPS

5.5

Mobile

Rigid

Production

7/8

LTPS

5.5

Mobile

Rigid/flexible

Production

A2-E

9

LTPS

5.5

Mobile

Rigid

3Q 2016

A3

1

LTPS

6

Mobile

Flexible

1Q 2015

2

LTPS

6

Mobile

Flexible

4Q 2015

3

LTPS

6

Mobile

Flexible

1Q 2016

4

LTPS

6

Mobile

Flexible

1Q 2016

5

LTPS

6

Mobile

Flexible

1Q 2016

6

LTPS

6

Mobile

Flexible

3Q 2016

7

LTPS

6

Mobile

Flexible

3Q 2016

8

LTPS

6

Mobile

Flexible

3Q 2016

SD A4 (L7-1)

8

LTPS

6

Mobile

Flexible

4Q 2016

8

LTPS

6

Mobile

Flexible

1Q 2017

8

LTPS

6

Mobile

Flexible

1Q 2017

8

LTPS

6

Mobile

Flexible

3Q 2017

8

LTPS

6

Mobile

Flexible

4Q 2017

Investor Takeaway

Nearly 55% of Coherent's revenues come from Microelectronics Product Applications, but most of the recent growth has been exhibited primarily by the smartphone display market. Coherent's flat panel display backlog in the past quarter is $482 million, up from $382M in the previous quarter.

In addition to its FPD business in the microelectronics market, the company makes lasers for microvias, which is driven by strong growth in the advanced semiconductor packaging market. According to our report entitled "High-Density Packaging (MCM, MCP, SIP, 3D-TSV): Market Analysis And Technology Trends" -

  • 35% of wafers will advanced packaging interconnects in 2017
  • Flip Chip will grow 6.8% in 2017 to 12.8 million wafers
  • WLP will grow 15.8% in 2017 to 17.4 million wafers

Both OLEDs and Advanced Semiconductor Packaging are two of the strongest sectors in the microelectronics market, and Coherent is a dominant supplier of lasers for both markets.

Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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