Alpha and Omega Semiconductor Ltd.

AOSL Details

Alpha and Omega Semiconductor Ltd. (NASDAQ: AOSL) is a designer, developer, and global supplier of a broad range of power semiconductors, including a wide portfolio of Power MOSFET, IGBT, IPM, and Power IC products. The company's product portfolio targets high-volume applications, including, smartphones, portable computers, flat-panel TVs, LED lighting, battery packs, consumer and industrial motor controls, and power supplies for TVs, computers, servers, and telecommunications equipment. As of June 10, 2021, the company’s market capitalization stood at USD 788.48 million.

AOSL Focus Markets (Source: Investor Presentation, May 2021)

New Product Launches: On June 08, 2021, the company introduced a series of single-channel Transient Voltage Suppressors (TVS) for high-speed line protection, which are ideal for Electrostatic Discharge (ESD) protection of Type-C connectors in mobiles, laptops, televisions, and other electronic devices. Previously on May 18, 2021, AOSL announced the launch of another new series of Smart Power Stages (SPS) targeting multiphase VR regulators powering high-performance GPU and CPU in desktop Add-In Graphics Cards (AICs), gaming laptops, servers, data storage, artificial intelligence, and networking equipment.

Q3FY21 Results: The company reported a sharp uptick of 58.36% in total revenue to USD 169.21 million in Q3FY21 (ending March 31, 2021) compared to USD 106.85 million in Q3FY20, resulting from strong end-market demand, robust shipments across most product categories, and optimized product mix. Net income for Q3FY21 was USD 14.97 million, as compared to a net loss of USD 9.89 million reported in Q3FY20.

Key Risks: The company’s revenue depends on the ability of its Original Equipment Manufacturer (OEM)-end customers to sell their products. Hence, the failure of these OEM-end customers to maintain commercial success could impact AOSL’s financial condition and prospects. In addition, two of the company’s main distributors collectively accounted for 64.8% and 65.2% of its revenue for FY20 and FY19, respectively. The company’s business could be severely affected if the agreements with these distributors are terminated or not renewed at favorable terms.

AOSL Long-Term Target Model (Source: Investor Presentation, May 2021)

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

(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.

AOSL Daily Technical Chart

Stock Recommendation: AOSL has declined by 17.73% in the past 3 months and is currently leaning towards the higher end of the 52-week range of USD 9.88 to USD 42.99. The stock is currently trading above its 200 DMA level. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 30.51. Considering the correction in the stock price in the past 3 months (after the stock soared 130.84% in the last 9 months), new product launches, and current trading levels, we recommend a “Watch” rating on the stock at the closing price of USD 30.17, down by 0.17% as of June 10, 2021.

* All forecasted figures and Industry Information have been taken from REFINITIV.

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