Vishay Intertechnology Inc.

Vishay Intertechnology Inc. (NYSE: VSH) produces discrete semiconductors and passive electronic components for use in automotive, industrial, computer, consumer, telecommunications, military, aerospace, and medical applications. MOSFETs, Diodes, Optoelectronic Components, Resistors, Inductors, and Capacitors are the six segments.

Key Highlights for the Q1 FY22.

• On May 24, 2022, Vishay Intertechnology, Inc. stated that the Company's Board of Directors declared a USD 0.10 per share common stock and Class B common stock dividend to be paid on June 29, 2022, to stockholders of record as of June 16, 2022.
• Vishay Intertechnology, Inc. released a new high energy wet tantalum capacitor on May 25, 2022, to fulfill the demands of military and aviation applications. This device type has the industry's largest capacitance per voltage rating and case size.
• Vishay Intertechnology, Inc. announced its results for the fiscal quarter ended April 2, 2022, on May 24, 2022, with revenues coming in at the high end of guidance and contribution margins at the higher end of the historical range, supported by continued price increases and positive singularities, despite ongoing increases in transportation costs, metal prices, and higher general inflation.
  

Important financials from the Q1 FY22 results

• Revenues were USD 853.8 million for the fiscal quarter ending April 2, 2022, compared to USD 843.1 million for the fiscal quarter ending December 31, 2021, and USD 764.6 million for the fiscal quarter ending April 3, 2021.

Source: Company’s filing

• Vishay stockholders earned USD 103.6 million, or USD 0.71 per diluted share, in the fiscal quarter ended April 2, 2022, compared to USD 36.5 million, or USD 0.25 per diluted share, in the fiscal quarter ended December 31, 2021, and USD 71.4 million, or USD 0.49 per diluted share, in the fiscal quarter ended April 3, 2021.
• Operating margins increased to 17.1% in the Q1 FY22, from 12.7% for the same period in the last year.
• Cash and cash equivalents increased to USD 789.25 million as of the quarter ending April 02, 2022, while being USD 774.11 million as of Q1 FY21, while the long-term debt less current portion was USD 456.48 million compared to USD 455.67 million a year ago for the same period.
• Net cash provided by operating activities decreased for the current quarter ending April 02, 2022, to USD 33.59 million compared to USD 57.32 million a year ago for the same period. This decrease was major because of increased inventory for the quarter by 12.37%.

Risk analysis

• Supplier Concentration Risk: VSH obtains most of its raw materials from a small number of suppliers throughout the world, posing a risk of supplier concentration. As a result, if the firm has problems obtaining raw materials in adequate numbers, if the quality of those commodities is poor, or if suppliers raise their prices, its operating performance may suffer.

Outlook

Considering production challenges resulting from COVID lockdowns in Shanghai in April, the company expects revenues in the range of USD 830 to USD 870 million in the second quarter of 2022, with a gross margin of 28.1 percent plus/minus 50 basis points, assuming the same exchange rates versus the dollar as in the first quarter.

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

Source: Analysis by Kalkine Group

*% Premium/(Discount) is based on our assessment of the company's FY1 trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks. 

Stock Recommendation

VSH's stock price has fallen only 4.82% in the past nine months and is currently in the middle of its 52-week range of USD 17.57 to USD 24.16. The current price has broken above both the short-term (50-day) SMA and long-term (200-day) SMA as can be seen in the chart below, which can be seen as a bullish sign. We have valued the stock using the EV/EBITDA multiple-based relative valuation methodology and arrived at a target price of USD 26.04.

Considering only a 4.82% correction in the stock price even in a bearish market, solid margins, positive outlook, associated risks, and current valuation, we recommend a "Hold" rating on the stock at the current price of USD 20.40, down 1.59% as of June 03, 2022, at 10:40 AM PDT.

One Year Technical Chart, as of June 03, 2022, at 10:40 AM PDT. Data Source: REFINITIV, Analysis by Kalkine Group

Note 1: The reference data in this report has been partly sourced from REFINITIV.  

Note 2: Investment decisions should be made depending on the investors’ appetite for upside potential, risks, holding duration, and any previous holdings. Investors can consider exiting the stock if the Target Price mentioned as per the Valuation has been achieved and subject to the factors discussed above. 

Note 3: The report publishing date is as per the Pacific Time Zone.