Alpha and Omega Semiconductor Limited

AOSL Details

Alpha and Omega Semiconductor Limited (NASDAQ: AOSL) is a global designer, developer, and supplier of power semiconductors (power discretes and power Integrated Circuits (ICs)) to original equipment manufacturers (OEMs) and original design manufacturers (ODMs). The product line of the company includes approximately 2,300 semiconductor products. As of March 31, 2021, AOSL has a substantial patent portfolio in the United States, consisting of 893 patents and 65 patent applications. In addition, AOSL maintained its diversification effort during Q3FY21 by creating new silicon and packaging platforms to increase its serviceable accessible market (SAM) and provide better efficiency products. As of July 22, 2021, the company’s market capitalization stood at USD 695.59 million.

New Product Launches: On June 8, 2021, the company announced the launch of AOZ8S303BLS-24 and AOZ8S305BLS-24, a set of single-channel Transient Voltage Suppressors (TVS) for high-speed line protection utilizing the low capacitance TVS platform. In addition, AOSL previously launched a new series of Smart Power Stages (SPS) for multiphase VR regulators supporting high-performance GPU and CPU in desktop Add-In Graphics Cards (AICs), gaming laptops, data storage, artificial intelligence, and networking equipment on May 18, 2021.

9MFY21 Results: The company reported a sharp uptick of 40.02% in total revenue to USD 479.59 million during 9MFY21 (ended March 31, 2021) compared to USD 342.51 million during 9MFY20, primarily due to an increase in unit shipments and the average selling price of the products. Net income during 9MFY21 was USD 36.27 million, compared to a net loss of USD 16.32 million reported during 9MFY20. As of March 31, 2021, the company stood with cash and cash equivalents of USD 192.11 million, with total debt of USD 167.22 million.

Key Risks: The company sells a substantial part of its products to distributors, who in turn sell it to the end consumers. AOSL’s two leading distributors, i.e., WPG and Promate, collectively accounted for 64.8%, 65.2%, and 63.5% of its total revenue in FY20, FY19, and FY18, respectively. Such excessive dependence on a few distributors for business could harm the company’s financial health in the future.

Outlook: For Q4FY21, AOSL expects its revenues to be around USD 170 million (+/-USD 3 million), with the GAAP gross margin expected to be around 31.7% (+/- 1%). AOSL also projects its GAAP operating expenses to be in the range of USD 36.20 million (+/- USD 1 million).

Valuation Methodology: EV/EBITDA Multiple Based Relative Valuation

(Analysis by Kalkine Group)

• % Premium/(Discount) is based on our assessment of the company’s NTM 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 (Source: REFINITIV)

Stock Recommendation: AOSL's share price has increased by 54.99% in the past nine months and is currently leaning around the mid-band of the 52-week range of USD 10.02 to USD 43.00. The stock is currently trading below its 50 and 200 DMA levels, and its RSI Index is 36.45. We have valued the stock using the EV/EBITDA-based relative valuation methodology and arrived at a target price of USD 24.62. Considering the increase in the stock price, new product launches, current valuation, and associated risks, we recommend a “Watch” rating on the stock at the closing price of USD 25.48, down by 4.43% as of July 22, 2021.

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

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