Deutsche Bank Comments On Varian Semiconductor's Growth

Varian Semiconductor VSEA reported F1Q11 results that beat estimates and guided double digit revenue growth into the March quarter, the strongest QoQ growth among peers. With new fabs coming on line at fastest pace in over three years and implant's leverage to capacity buys, Varian's revenue growth is accelerating ahead of peers. However, a portion of its growth outlook is based on contributions from PLAD and Solion, both also adding a level of risk. Varian is positioned to post the strongest y/y growth among its peers from strong growth in its core implant products as well as contributions from its new PLAD and Solion products. However the latter two also bring an added layer of risk. PLAD is mostly leveraged to DRAM; meaningfully lower DRAM spending could limit growth in PLAD and may even lead to y/y contraction. The Solion is clearly gaining traction in Solar PV cell processing. However, the solar PV industry could be just as, if not more volatile than the SCE industry. We believe that an oversupply in solar PV is possible in C2011 and could pose risk to Solion's contribution. Thus, Deutsche Bank views Varian's stronger growth outlook as being balanced by a layer of added risk associated PLAD and Solion products. Deutsche Bank has a $46 PT and Hold rating on Varian Semiconductor VSEA closed Thursday at $43.54