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Amkor Technology, Inc.
AMKR Details
Amkor Technology Inc. (NASDAQ: AMKR) is a provider of outsourced semiconductor packaging and test services to device manufacturers, fabless semiconductor companies, and contract foundries. AMKR's services are segregated into 1) Advanced Products, which include flip chip, wafer-level processing, and related test services, and 2) Mainstream Products, which include leadframe, wirebond, and MEMS packaging and its allied test services. As of May 13, 2021, the company’s market capitalization stood at USD 4.57 billion.
Amkor supply chain (Source: Investor Presentation, May 2021)
Launching Industry 4.0 Initiatives: On February 23, 2021, the company announced new measures to achieve Industry 4.0 initiatives, both in quality and efficiency. Industry 4.0 leverages AI, machine learning, and interconnected systems for factory automation and intelligence. AMKR now uses real-time, in-process decision-making speed to drive quality, asset utilization, and efficiency gains.
Robust Q1FY21 Results: The company reported a 15.05% rise in net sales to USD 1.33 billion in Q1FY21 (ending March 31, 2021) compared to USD 1.15 billion in Q1FY20 (ending March 31, 2020). The Advanced Products group contributed 69.42%, while the Mainstream Products group contributed 30.58% of the net sales in Q1FY21, driven primarily by the implementation of 5G smartphones. The company declared a massive growth of 86.08% in net income to USD 120.01 million in Q1FY21 compared to USD 64.49 million in Q1FY20.
Key Risks: The company’s top ten largest end customers contributed 65% of its net sales in FY20. The loss of any key customers could result in a decline in sales or have a material impact on the company's financial health.
Q2FY21 Guidance (Source: AMKR Investor Presentation, May 2021)
Outlook: For Q2 2021, the company is projecting its net sales to be in the range of USD 1.29 billion to USD 1.39 billion. The gross margin is expected to be in the range of 17-20% of its net sales. AMKR is forecasting its Q2FY21 outlook for adjusted EPS to be in the range of USD 0.32 to USD 0.52.
Valuation Methodology: EV / EBITDA Multiple Based Relative Valuation
(Data Source: Refinitiv, Thomson Reuters, Analysis by Kalkine Group)
AMKR Daily Technical Chart (Source: Refinitiv, Thomson Reuters)
Stock Recommendation: AMKR has declined by 23.03% in the past month and is currently leaning towards the mid-point of the 52-week range of USD 9.04 to USD 27.50. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 21.89. Considering the significant correction in the stock price in the past one month, quick cash converting ability, and strong fundamentals, we recommend a “BUY” rating on the stock at the closing price of USD 18.74, up by 3.77% as of May 13, 2021.
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Past performance is not a reliable indicator of future performance.
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