BMO Capital Markets analyst Bhavesh Lodaya initiated coverage of Entegris Inc (NASDAQ:ENTG) at an Outperform rating with a price target of $129.
The analyst sees ENTG as a value compounder, given its strong volume growth and incremental margins, and believes it to have one of the highest EBITDA growth and margins.
As ENTG drives around 80% of revenues from highly used consumable products, the analyst sees long-term stability and visibility for earnings.
Lodaya believes ENTG is well-positioned to capitalize on the rising demand for contamination control (up to 5x-6x) in fast-growing areas like AI, AR/VR, and 5G.
The analyst expects higher demand prospects and upcoming new plants to drive above-consensus EBITDA growth of around 35% over 2023-2025 in its largest and highly profitable MC platform.
Lodaya expects ENTG to witness higher chemistry content (up to 2x-3x) per wafer on industry advancement in the next logic/memory nodes, which can drive continued outperformance in its end markets.
The analyst anticipates ENTG’s focus to shift toward driving cost and revenue synergies from deleveraging as it is on track to attain leverage of below 3.5x.
Lodaya expects revenues of $3.67 billion and EPS of $2.65 in 2023 and $4.12 billion and $3.76 in 2024, and $4.58 billion and $5.00 in 2025.
Also Read: Entegris Terminates Distribution Deal With Element Solutions Unit In Exchange For $200M
Price Action: ENTG shares are trading lower by 0.10% at $106.40 on the last check Tuesday.