Advertising. Infineon wants more. True to the motto “Once is never”, the new Infineon CEO Jochen Hanebeck wants to trump the record profit of the past fiscal year and achieve even higher results. But is that realistic? It is well known that the chip industry is subject to the classic “pig cycle”. True to this, the manufacturers massively expand their capacities with increasing demand until an oversupply pushes down the prices and margins of the manufacturers and these less profitable production plants shut down. In some areas, such as the chip business for PCs and laptops, a slump in demand can already be observed. But Infineon doesn’t seem to feel any of this.
The Munich-based group is positioned in high-growth semiconductor segments and is benefiting from the persistently high demand in sectors such as automotive and renewable energies. In the past fiscal year, Infineon generated around 46 percent of group sales in the automotive division. With 29 percent, the Power & Sensor Systems division is the second strongest source of sales. The two divisions Connected Secure Systems and Industrial Power Control contributed 13 and 12 percent respectively to sales.
Most recently, the Bavarian chip manufacturer surprised with a pleasing annual result and an optimistic outlook. Sales and profits in the past fiscal year 2021/22, which ended on September 30, 2022, exceeded analysts’ expectations. Sales climbed 29 percent over the previous year to 14.2 billion euros, and consolidated net income increased by 87 percent to 2.2 billion euros. After the record result in 2021/22, CEO Hanebeck, who has been in office since April, is forecasting a new record turnover of 15.5 billion euros for the current financial year. In the long term, the group wants to grow by ten percent a year, so far this goal was nine percent. In addition, Infineon raised the long-term target for the operating margin from 19 percent to 25 percent.
Well-filled order books, rising sales prices and a weak euro give Infineon a tailwind. In order to be able to meet demand and reduce dependence on foreign manufacturers, the group is investing heavily in expanding production capacities. Among other things, five billion euros are to flow into a new plant in Dresden. This is the largest investment for the group to date. The plant in Villach, Austria, which opened in 2021, cost “only” 1.6 billion euros.
Despite the good prospects for Infineon, uncertainties remain. A global economic slump could lead to an abrupt end to demand, or a weak dollar could impact earnings. According to analyst calculations, a 10 percent drop in the dollar exchange rate would reduce sales by 6 percent and adjusted operating income by 13 percent. Against this background, investors who are convinced of the good long-term prospects for Infineon can also consider investment alternatives. Express certificates with a memory function and airbag offer the prospect of attractive interest payments and are equipped with a risk buffer that can cushion price falls.
6.70 percent interest per year if the 65 percent barrier is maintained
That DekaBank Infineon Express certificate memory with airbag 02/2029 (WKN DK07ZJ) offers the possibility of early repayment at the nominal amount (EUR 1,000.00) plus the corresponding interest amount of EUR 67.00 per period including catch-up effect (memory function) when the repayment thresholds fall. The repayment threshold is 100 percent of the starting value in the first year and then decreases by five percentage points annually. If, for example, the Infineon share is quoted at 100 percent of the starting value or higher on the first observation day, the nominal amount of EUR 1,000.00 plus the interest amount of EUR 67.00, i.e. a total of EUR 1,067.00, will be repaid. If, on the other hand, the share price is not at or above the respective redemption threshold on any of the five observation days, the nominal amount of EUR 1,000.00 per certificate will be repaid on final maturity in February 2029 if the closing price of the Infineon share on the valuation day exceeds the barrier (65.00 percent of the starting value) at least claimed. The annual interest amount is paid if the stock trades at or above the barrier on the relevant observation date. The memory function also allows missed interest payments to be made up for in subsequent years.
However, if the barrier is undershot on the valuation date, there is a risk of losses. In this case, instead of the nominal value, investors are transferred a fixed number of Infineon shares that have fallen in value. The number of shares (reference number) is not based on the starting value, but on the base price, which, like the barrier, is also 65.00 percent of the starting value (airbag function). In addition, as with any certificate, the issuer risk must be taken into account because, particularly in the event of DekaBank’s insolvency, there would be a risk of losses up to and including the total loss of the nominal amount invested.
The subscription runs from 11/21/2022 to 12/16/2022, subject to extension or shortening.
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Hussam Masri is in charge of the expansion and development of the strategically important “Private Banking and Wealth Management” division and in this function he is responsible for the Private Banking Sales, Wealth Management, Private Banking Sales Strategy, product specialists and the certificates business and product marketing units for the Deka Group responsible.