Melexis Earnings: Outperforming Automotive Peers in a Difficult Environment; Shares Undervalued

Narrow-moat Melexis' second-quarter sales of EUR 245.7 million fell within management’s range of EUR 242 million-EUR 247 million, which represented 4% year-over-year growth and 1.6% sequential growth. Melexis is outperforming other automotive peers by a wide margin. Competitors NXP and STMicroelectronics recently reported 4% and 8% sequential revenue declines in their automotive divisions, respectively, in deep contrast to Melexis' 1.6% growth. Melexis resilience comes from increased chip content in safety and comfort car applications where the firm is gaining market share and growth is agnostic from the type of car (internal combustion engine versus electric vehicle). Product innovations in car safety are also flowing from premium cars to more basic ones, resulting in revenue growth. We maintain our EUR 100 fair value estimate and reiterate this is a good buying opportunity for investors looking for exposure to the long-term trend of increasing chip content per car. Shares are undervalued.