Vicor Corporation

VICR Details

Vicor Corporation (NASDAQ: VICR) is engaged in the manufacturing and commercialization of power components and power systems to Original Equipment Manufacturers (OEMs), Original Design Manufacturers (ODMs), and other contract manufacturers. The company operates in two segments, namely, 1) Brick Products, which consists of a wide range of integrated power convertors with multiple conversion stages. The products in this segment include DC-DC converter and components providing AC line rectification, power factor correction, and transient protection, 2) Advanced Products, which consists of more recently developed products based on the company’s proprietary Factorized Power Architecture (FPA) based technology. These include AC to DC voltage converter, DC voltage distribution, and high voltage conversion systems. As of May 27, 2021, the company’s market capitalization stood at USD 3.85 billion.

Autonomous Security Robot Developer chooses Vicor: On April 15, 2021, Knightscope Inc, a developer of advanced security technologies, announced that it selected VICR’s technology to power its high-performance power modules for Knightscope’s upcoming 5th generation Autonomous security Robots (ASRs). The modules will help the company to achieve the efficiency needed for these robots.

Launch of a New Product: On January 5, 2021, VICR announced its first radiation-tolerant DC-DC converter power module, enclosed in the latest Vicor plated SM-ChiP package. The chips were tested by Boeing and are found to be invulnerable to 50 Krad of total ionizing dose and are immune to a single event upset. High-end commercial satellites require high power and low noise features so that it does not get disturbed by the intense radiation present in the atmosphere.

Q1FY21 Results: The company reported a 40.05% rise in net revenue to USD 88.79 million in Q1FY21 (ending March 31, 2021) compared to USD 63.40 million in Q1FY20 (ending March 31, 2020). The company reported an increase in net income to USD 15.09 million in Q1FY21 compared to a loss of USD 1.73 million in Q1FY20. As of March 31, 2021, the company had cash and cash equivalents of USD 127.41 million with no long-term debt.

Key Risks: Due to the company’s strategic focus on larger, high-volume customers, it witnesses a greater concentration of sales among relatively fewer customers. Its top customer accounts for approximately 24.1% and 14.30% of the trade accounts receivable in FY20 and FY19, respectively. The loss of these key customers could hamper the company’s financial state of affairs.

Outlook: As of March 31, 2021, the company had capital expenditure commitments of approximately USD 11.45 million for manufacturing equipment. The remaining capital expenditure budget of USD 38 million for FY21 will be utilized by the company for the construction of a 90,000 sq. ft. manufacturing facility and installation of new production equipment.

Valuation Methodology: EV/Sales Multiple Based Relative Valuation

(Data Source: REFINITIV, Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company’s FY21E trading multiple after considering its key growth drivers, economic moat, stock's historical trading multiples versus peer average/median, and investment risks.

VICR Daily Technical Chart (Source: REFINITIV)

Stock Recommendation: VICR stock price has already surged 45.88% in the past twelve months and is currently trading at a higher band of the 52-weeks range of USD 57.37 to USD 104.68. The stock is currently trading far above its 200 DMA levels. We have valued the stock using the EV/Sales-based relative valuation methodology and arrived at a target price of USD 96.29. Considering the significant increase in the stock price in the past twelve months, latest developments, strong margins, and current valuation, we recommend a “Hold” rating on the stock at the closing price of USD 89.41, up by 0.97% as of May 27, 2021.

* The reference data in this report has been partly sourced from REFINITIV.