Smallcap Semiconductor Stock Slumps 10% as FY23 Numbers Disappoint Street; Rs 4 Dividend Announced

Today, the semiconductor industry stands at the heart of innovation, driving the progress of countless sectors.

However, the recent market turbulence has sent shockwaves with the share price of ASM Technologies, a prominent name in the semiconductor industry, tumbling 10%.

Was this fall fueled by a sharp decrease in chip sales? Or due to managerial change within the company?

The semiconductor megatrend, driven by emerging technologies such as artificial intelligence, 5G, and the Internet of Things, promises a bright future for stocks within the industry.

Let's have a look at what caused the fall and what lies ahead for this semiconductor stock.

Why ASM Technologies share price is falling

Yesterday, the company filed its quarterly results and annual results for the financial year ended March 2023.

On both - quarterly as well as annual basis - bottom-line and operating margins saw a steep decline triggering a selloff in the stock the very next day.

Have a look at the tables below -

Quarterly Results (Rs m, consolidated)

Rs m, consolidated	Mar-23	Mar-22	Dec-22	YoY (%)	QoQ (%)
Net Sales	519.4	547.1	541.4	-5%	-4%
Operating Profit	22.0	30.2	52.0	-27%	-58%
Net Profit	3.7	12.7	11.1	-71%	-67%

Data Source: BSE, Screener.in

Operating margins on the decline

Qtr ending	Mar-20	Jun-20	Sep-20	Dec-20	Mar-21	Jun-21	Sep-21	Dec-21	Mar-22	Jun-22	Sep-22	Dec-22	Mar-23
Operating Margin	19.9%	19.5%	14.9%	7.5%	9.9%	11.9%	16.2%	11.2%	5.5%	10.6%	9.4%	9.6%	4.2%
Net Profit Margin	17.6%	13.6%	7.2%	3.1%	3.6%	7.1%	8.5%	10.2%	2.3%	6.4%	3.8%	2.1%	0.7%

Data Source: Equitymaster, Screener

Financial Snapshot of ASM Technologies

Rs m, consolidated	FY19	FY20	FY21	FY22	FY23
Revenue	880.3	920.1	1,373.9	1,916.7	2,200.0
Growth (%)	7%	5%	49%	40%	15%
Operating Profit	109.1	65.0	201.5	279.6	210.0
OPM (%)	12%	7%	15%	15%	10%
Net Profit	69.6	12.4	85.1	146.1	70.0
Net Profit Margin (%)	8%	1%	6%	8%	3%

Data Source: BSE, Screener.in

With today's decline, the stock has now fallen on to the negative side with losses of 10% on a year-to-date (YTD) basis.

Shares of ASM Technologies have been under pressure following the Russia-Ukraine war. Half of ASM's revenue is derived from exports, with high dependence on US markets.

For the past couple of quarters, the company's margins have declined on the back of higher employee expenses and other overhead costs.

Along with quarterly results, the company's board recommended a final dividend of Rs 4 per share for the financial year 2022-23.

What next?

During the financial years 2020, 2021 and 2022, ASM Technologies saw healthy growth on the back of increased orders from existing clients.

No wonder shares were on a roll.

But the company lost momentum in FY23 as it did not see such strong working capital utilisation as it did between 2020-2022.

In 2022, ASM Technologies forayed into areas of virtual reality (VR), internet of things (IoT), and open edX platform management.

The company's MD Rabindra Srikantan also highlighted in October 2022 that India has a lot of ground to cover and should focus on manufacturing of semiconductors.

Here's an excerpt:

• I think many states have given a lot of templates along with the PLI, and I'm sure that in the next maybe 18 months-24 months, or even sooner, we will see some of these getting into production.

The semiconductor chip crisis is still around which has brought an unforeseen opportunity for India.

Here's what Co-head of Research at Equitymaster Tanushree wrote in her recent editorial...

• First, it was the covid lockdowns. Then the Russia-Ukraine war. The semiconductor shortages affected many industries all over the world. In India, auto firms were badly affected by supply constraints.
  
  We must ensure this never happens again. India must become a major semiconductor manufacturing hub by the end of the decade.
  
  China only accounts for 7.6% of global semiconductor sales. It has planned massive investments in the sector over the next decade. As semiconductor production requires considerable water resources, which China lacks, it's frantically looking for alternative water sources.
  
  Controlling advanced chip manufacturing in the 21st century with water resources may prove to be like controlling oil supplies in the 20th. The country that controls this manufacturing can throttle the military and economic power of others.
  
  India's plans to be a global supply chain hub depends on chip availability. This is even more so for the EV ecosystem in the country. Also, these Taiwanese chip foundries risk losing business amid the US China standoff.

It remains to be seen how and when ASM Technologies will be able to pick up the momentum.

In the meantime, check out the below video where Tanushree shares her views on India's top semiconductor stocks.

About ASM Technologies

ASM Technologies provides consulting and product development services in the areas of engineering services and product R&D.

The main clients of ASM Technologies include reputed customers involved in manufacturing of semiconductor equipment and network devices.

To know more, check out ASM Technologies financial factsheet and its latest quarterly results.

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such. Learn more about our recommendation services here...