- Frencken released 1Q26 update with limited financials. 1Q26 revenue was within our expectations at 21% of our FY26e forecasts, due to a stronger 2H26e expected. 1Q26 PATMI was below expectations, at 18% of our FY26e forecasts. PATMI declined 20% YoY, driven by a 7% YoY fall in semiconductor revenue due to lower EUV component volumes from Europe, and S$1.1mn foreign exchange loss.
- The decline in 1Q26 semiconductor revenue was within our expectations, as Frencken prepares to gradually ramp EUV component production in 2H26e. We believe memory players will drive demand for high-NA EUV equipment in 2H26e and 2027e to address the memory chip shortage. Memory players are expected to contribute ~44% of 2026e revenue to Frencken’s key semiconductor equipment customer (2025: 34%).
- We downgrade to ACCUMULATE (prev. BUY) with a higher TP of S$3.30 (prev. S$2.50). The downgrade is due to recent share price rally. We lowered FY26e revenue and PATMI by 4%, due to the soft semiconductor demand in 1H26e. We roll forward our model to FY27e, increasing our P/E assumptions to 29x FY27e P/E (prev. 24x), a 20% discount to peers’ average of 37x.
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