Monolithic Power Systems (NASDAQ: MPWR) и Silicon Laboratories (NASDAQ: SLAB) — American suppliers of components for the production of high-tech products. Both companies are successful and at the same time outrageously expensive.. And both rely heavily on sales in China.
What's going on here
Readers have long asked us to start analyzing the reporting and the foundation of the business of foreign issuers.. Suggest in the company's comments, analysis of which you would like to read.
There are many screenshots with tables from reports in the overview. To make it easier to use them, we translated them into Google tables and translated them into Russian. note: there are several sheets. And keep in mind, that companies round up some numbers in their reports, therefore, the totals in graphs and tables may not converge.
Download the table from the report
How does Monolithic Power Systems make money? (NASDAQ: MPWR)
The company designs and assembles semiconductor products for complex technological devices. Essentially, she designs and assembles parts from components, which are produced for it by third-party companies.
Goods, related to AC regulation, give 95% proceeds - actually, it's all, what is needed for the supply of high-tech products to work. Yet 5% gives light control, this is the brightness of the screen and other important functions of technology.
By destination, the company's products are distributed as follows.
Automotive — 12,9%. Audio- and video systems for cars, connectivity and security applications.
Computer computing and data storage — 30%. Stuff for printers, Notebooks, servers and personal computers.
Industry and more — 14,2%. Smart counters, power supplies, applications to ensure safe operation, cash registers and various industrial equipment.
Consumer sector — 26,1%. TV Box Components, Monitors, gaming devices, chargers, means of mobile communication, wearable electronic devices, household appliances, digital video players, GPS devices, Televisions, stereo systems and cameras.
Communications — 16,9%. Network infrastructure, routers and modems, access points.
The main clients of the company are intermediaries-resellers and equipment manufacturers. Goods are 97% sales of the company, rest 3% - these are royalties and services like testing semiconductor wafers for third-party companies.
How Silicon Laboratories makes money (NASDAQ: SLAB)
The company designs and assembles integrated circuits for high-tech products, the chips themselves are produced by third-party companies. The company's revenue is divided into two segments.
Internet of things — 57,93%. Here the company makes microcontrollers and wireless solutions.. These are things, which are needed to control ventilation, home automation, smart meters and smart lighting, camera, Consumer Electronics. The company also produces sensors in this segment.. The scope of this product category is as follows: Device, that consumers wear, like fitness trackers, toys, monitors, medical service.
Infrastructure and Automotive — 42,07%. It's electronic stuffing for so many different things., like solar panels, cars and more. It makes no sense to parse the segment in detail, as the company sells the related division for 2.75 billion to Skyworks Solutions.
China gives 44,85% of the company's total revenue, 10,39% — USA, the rest is given by other unnamed countries. The lion's share of the company's products is sold through intermediaries - and less than a quarter comes from direct deliveries.
Conjuncture
Today in the world there is a shortage of semiconductors, and in the US consumer boom in demand for products, requiring complex electronic components. By the way, we discussed this plot in detail in a double review of Applied Materials and Entegris.
This point has already been reflected in the statements of both issuers., And, Considering, that demand does not subside, in the next quarter, both companies will at least meet analyst expectations, maybe, and surpass them.
SLAB quarterly earnings per share, in dollars
| Forecast | Reality | |
|---|---|---|
| 2 neighborhood 2020 | 0,52 | 0,69 |
| 3 neighborhood 2020 | 0,57 | 0,74 |
| 4 neighborhood 2020 | 0,73 | 0,73 |
| 1 neighborhood 2021 | 0,73 | 0,84 |
| 2 neighborhood 2021 | 0,75 | — |
Forecast
2 neighborhood 2020
0,52
3 neighborhood 2020
0,57
4 neighborhood 2020
0,73
1 neighborhood 2021
0,73
2 neighborhood 2021
0,75
Reality
2 neighborhood 2020
0,69
3 neighborhood 2020
0,74
4 neighborhood 2020
0,73
1 neighborhood 2021
0,84
2 neighborhood 2021
—
MPWR quarterly earnings per share, in dollars
| Forecast | Reality | |
|---|---|---|
| 2 neighborhood 2020 | 1,00 | 1,08 |
| 3 neighborhood 2020 | 1,68 | 1,69 |
| 4 neighborhood 2020 | 1,24 | 1,31 |
| 1 neighborhood 2021 | 1,34 | 1,46 |
| 2 neighborhood 2021 | 1,69 | — |
Forecast
2 neighborhood 2020
1,00
3 neighborhood 2020
1,68
4 neighborhood 2020
1,24
1 neighborhood 2021
1,34
2 neighborhood 2021
1,69
Reality
2 neighborhood 2020
1,08
3 neighborhood 2020
1,69
4 neighborhood 2020
1,31
1 neighborhood 2021
1,46
2 neighborhood 2021
—
Jade Chip, the party is happy with you
Considering, how much of both companies' sales are in China, it would be useful to talk about the Middle Kingdom.
At all, things are going well for the issuers in question in China: the Chinese are actively developing their own semiconductor industry and in the process order many, many products from our issuers. But that's the same problem.
As we wrote before, The US made a strategic decision to "push China", therefore the risks are great, that the export of high-tech products to China will be limited, which will negatively affect the reporting of both issuers.
Payouts
MPWR paying 2,40 $ per share per year, what it takes 112.8 million a year is a little less 66% company profits. According to the latest report, the company has 286.615 million debts, 187,909 million of them need to be extinguished within a year. MPWR has enough free funds: 218,368 million on accounts and 84.059 million debts of counterparties, so, in theory, there should be enough money for everything. However, the possibility of dividend cuts should be kept in mind..
SLAB dividend, Fortunately, does not pay - and with the sale of her division, she will be able to close all her debts.
Concentrate
У MPWR, according to the report, more than a third of revenue comes from two large resellers: one gives 24% proceeds, second - 11%.
SLAB also has a strong concentration of customers - meaning the end users of products, taking into account sales through intermediaries. 26% revenue comes from Arrow Electronics, 20% - on Edom Technology and 11% - on Sekorm.
Review of relations with one of these customers may adversely affect the reporting of companies.
Complete inadequate
MPWR has a target market of about $17 billion, just $1.15 billion more than its current capitalization.. At the same time, the company occupies about 5% their market. With P / E in the area 96 it seems excessive.
SLAB doesn't look so brazen: capitalization 5.92 billion and a market share of about 6,64% with a target market of 10 billion, expandable to 26 billion. Truth, P / E is even more abnormal here, than the MPWR, - above 251.
All in all, both companies are very expensive relative to their real capabilities and are just asking for a correction.
Resume
Both of the reviewed issuers are very interesting, but, Unfortunately, I don't really want to buy them at the current price.. Even taking into account, that the outlook for their business is generally positive, the current price cannot be justified by any prospects. I would have waited for the shares of both companies to fall by 40% from the current price and only after that took it with the expectation of a rebound. Think, that such an opportunity will present itself during the next stock market correction, That, like all corrections, will be pointless, merciless and completely unexpected for all market participants.
