When the stock of a well-run company that you’ve long
admired gets to a point where the apparent annualized returns are in the
double-digits, it’s a good time to refresh your due diligence. Such is
the case with Shin-Etsu (OTCPK:SHECY)
(4063.T), where management continues to execute at a high level and
where the company’s core markets are healthy, but where recent fears
relating to the semiconductor market seem to be having a
disproportionate impact on the share price.
The risk
of a sudden drop in semiconductor demand is not trivial, as Shin-Etsu’s
wafer business generates about 30% of total operating profits today,
but I also don’t think it’s particularly likely given the tight current
supply situation and the relatively constrained capacity expansion plans
across the industry. I also don’t think my modeling assumptions are all
that ambitious, as I’m looking for long-term revenue growth of 4% and
high single-digit FCF growth from a company exposed to global
construction growth, semiconductor production, and EVs.
Read more here:
Wafer Worries Weighing On Shin-Etsu
No comments:
Post a Comment