Orbotech signs biggest ever Chinese deal

Orbotech CEO Asher Levi, photo: Eyal Yitzhar
Orbotech CEO Asher Levi, photo: Eyal Yitzhar

The Israeli inspection solutions company has signed a $61 million deal with BOE Technology for very large TV screens.

Electronic device inspection system company Orbotech Ltd. (Nasdaq: ORBK) reported today that BOE Technology, a leading Chinese manufacturer of flat panel displays had chosen its inspection and testing solutions for its Hefei display fabrication facility, which produces next generation flat panel displays for very large size televisions. This is Orbotech's biggest deal in China so far. The deal and is estimated at $61 million.

As part of the deal, the company will provide machinery enabling mass production of very large TV displays (over 50 inches, produced on giant substrates of about 3 square meters). In the first stage, BOE's new facility will produce 90,000 flat screens per month; in 2019, it is expected to reach full-scale production of 120,000 screens. Orbotech is to begin supplying the first machines in the first half of 2017. It will receive most of the revenue in 2017 and the rest in 2018.

Orbotech rides the OLED wave

Orbotech has been operating in China for over 20 years and earns 30% of its revenue in the Chinese market. The company currently has 2,450 employees, about 600 of them employed in China in the fields of R&D, sales, marketing, customer service and operation.

"This is the largest single deal in Orbotech's history in China, building on more than a decade of close and successful cooperation with BOE and harnessing our proven track record of over 20 years in providing superior yield enhancement solutions for mass production to the flat screen industry," said Orbotech Vice President Gil Oron.

In response to "Globes"' question regarding the effect of this contract on expected company revenue for 2017, Orbotech CFO Ran Bareket said, "it is still early to discuss expected revenue or profit for next year, but we can definitely see positive trends in the company's operations. The number of screens sold globally does not change much, but the size, quality and of course production technology of sold screens does change. At present, the OLED technology is entering the market strongly and in the next few years we will see more and more screens working on OLED, and there is also the shift to flexible screens. These trends, of constant technological changes and upgrades, of course contribute to Orbotech's results, which we saw in third quarter statements."

Share price jumps, profits break records

Orbotech, managed by CEO Asher Levi, manufactures inspection solutions for electronics devices and focuses on two main fields: printed circuit boards and flat screen displays. Orbotech's market cap is $1.5 billion, after a 42% rise in the past year. In the past five years, the company's share jumped almost 200%. Orbotech reported a $205 million record profit for the third quarter, slightly higher than analyst forecasts. Its revenue rose 4.6% from the last quarter and 7.6% from the corresponding quarter last year. Overall, non-GAAP net profit rose 39% from the last quarter, to $33 million, or $0.68 per share, $0.04 higher than analyst forecasts.

The GAAP net profit was $24.7 million, $0.51 per share, 55.3% up from the corresponding quarter in 2015. In the first nine months of 2016, Orbotech reported a 4.8% rise in revenue to $591.4 million, with non-GAAP net profit up 32.2% from the corresponding period last year. The company's management estimates that its fourth quarter revenue will be $214-224 million and, if it reaches this target, its annual revenue will be $805-815 million.

Published by Globes [online], Israel business news - www.globes-online.com - on December 5, 2016

© Copyright of Globes Publisher Itonut (1983) Ltd. 2016

Orbotech CEO Asher Levi, photo: Eyal Yitzhar
Orbotech CEO Asher Levi, photo: Eyal Yitzhar
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