Amid the ever-changing landscape of today’s technology-driven world, the semiconductor industry is a pivotal cornerstone, underpinning innovations and advancements across diverse sectors. Considering the ever-growing demand for chips across different sectors, it could be prudent to buy fundamentally strong chip stocks: Trio-Tech International (TRT), Nikon Corporation (NINOY), and ChipMOS TECHNOLOGIES INC. (IMOS).
The global semiconductor market is driven by the widespread use of chips in various applications, including electronics, industrial equipment, automotive, networking, communications, and data processing. The rapid adoption of emerging technologies like AI and IoT drives the demand for customized chips, driving the industry’s growth.
According to Precedence Research, the global semiconductor market is expected to reach $1.88 trillion by 2032, growing at a CAGR of 12.3%. Furthermore, according to a report by Mordor Intelligence, the semiconductor industry is projected to reach $1.09 trillion by 2028, growing at a CAGR of 10.9%.
Gartner predicts AI chip revenue in the semiconductor industry to reach $53.4 billion this year, growing 20.9% over the prior year. This growth can be primarily attributed to the demand for high-performance GPUs and optimized semiconductor devices needed to run generative AI platforms.
The firm anticipates continued double-digit growth in AI semiconductor revenue, with a 25.6% increase in 2024, reaching $67.10 billion. By 2027, AI chip revenue is expected to double from the current levels, reaching $119.40 billion.
According to Statista, revenue in the consumer electronics market will amount to $1.03 trillion in 2025 and is expected to grow at a CAGR of 2.3% in the forecast period 2023-2028. Such a spending splurge on electronics, especially among developing economies, should generate a huge demand for advanced chips and processors in the coming years.
Let’s delve deeper into the fundamentals of these Semiconductor & Wireless Chip stocks, starting with the third stock.
Stock #3: Trio-Tech International (TRT)
TRT offers manufacturing, testing, and distribution services to the semiconductor industry. It operates through four segments: Manufacturing, Testing Services, Distribution, and Real Estate.
In terms of trailing-12-month Price/Book, TRT’s 0.74x is 72.9% lower than the 2.74x industry average. Its 1.75x trailing-12-month EV/EBITDA is 88.3% lower than the 14.98x industry average. Likewise, its 9.58x forward EV/EBIT is 52.2% lower than the 20.04x industry average.
TRT’s total revenues for the fiscal quarter that ended September 30, 2023, amounted to $9.97 million. Its comprehensive income attributable to TRT common shareholders came in at $26 thousand, compared to a comprehensive loss of $314 thousand in the prior-year quarter. The company’s total operating expenses decreased 1.3% year-over-year to $2.52 million.
Its net income attributable to TRT common shareholders stood at $230 thousand. Also, its EPS came in at $0.05.
Over the past six months, TRT has gained 24.1% to close the last trading session at $5.35.
TRT’s POWR Ratings reflect solid prospects. It has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It is ranked #13 out of 91 stocks in the Semiconductor & Wireless Chip industry. It has an A grade for Momentum and a B for Value and Sentiment. Click here to see TRT’s Growth, Stability and Quality ratings.
Stock #2: Nikon Corporation (NINOY)
Headquartered in Minato, Japan, NINOY is a global manufacturer and distributor of optical instruments. It operates through Imaging Products, Precision Equipment, Healthcare Business, Components Business, Industrial Equipment, and other segments. The company’s offerings include various products such as cameras, microscopes, lithography systems, optical components, etc.
On September 27, NINOY announced the release of the NIKKOR Z 135mm f/1.8 S Plena, a mid-telephoto prime lens compatible with full-frame/FX-format mirrorless cameras. In addition, the company released the full-frame/FX-format Nikon Z f mirrorless camera in the same month. These new products are expected to add to NINOY’s revenue stream substantially.
On August 31, 2023, NINOY introduced the NSR-2205iL1 5x reduction i-line stepper for manufacturing devices such as power and communications semiconductors and MEMS. It offers high productivity, greater affordability, optimized yield, and accurate wafer measurement through features like multipoint autofocus, advanced wafer stage leveling, and expanded depth of focus range.
In terms of forward EV/Sales, NINOY’s 0.70x is 39.1% lower than the 1.15x industry average. Its 6.22x forward EV/EBITDA is 35.5% lower than the 9.64x industry average. Likewise, its 10.94x forward EV/EBIT is 19.4% lower than the 13.57x industry average.
For the first half ended September 30, 2023, NINOY’s revenue and gross profit for the period came in at ¥331.30 billion ($2.21 billion) and ¥142.07 billion ($949.02 million), up 14.9% and 7.5% year-over-year, respectively. The company’s total comprehensive income for the period increased 7.4% over the previous year's value to ¥49.96 billion ($333.73 million).
In addition, its profit for the period stood at ¥9.34 billion ($62.39 million). Also, its EPS came in at ¥28.15.
Street expects NINOY’s revenue for the quarter ending June 30, 2024, to increase 7.1% year-over-year to $1.18 billion. Over the past year, the stock has gained 4.1% to close the last trading session at $9.39.
NINOY’s POWR Ratings reflect this promising outlook. It has an overall grade of B, translating to a Buy in our proprietary rating system.
It has a B grade for Value and Stability. It is ranked #7 within the same industry. To see the additional ratings of NINOY for Growth, Momentum, Sentiment and Quality, click here.
Stock #1: ChipMOS TECHNOLOGIES INC. (IMOS)
Headquartered in Hsinchu, Taiwan, IMOS develops, manufactures, and sells high-integration and high-precision ICs and related assembly and testing services internationally. The company operates through Testing, Assembly, Testing, and Assembly for LCD, OLED, and Other Display Panel Driver Semiconductors, Bumping, and Other segments.
In terms of forward Price/Sales, IMOS’ 1.34x is 47.8% lower than the 2.56x industry average. Its 5.02x forward EV/EBITDA is 64.9% lower than the 14.28x industry average. Likewise, its 1.57x forward EV/Sales is 39.6% lower than the 2.60x industry average.
IMOS’ revenue for the third quarter ended September 30, 2023, increased 6.2% year-over-year to NT$5.58 billion ($175.72 million), while its gross profit increased 9.5% year-over-year to NT$889.08 million ($28 million). Its operating profit came in at NT$487.15 million ($15.34 million), registering a 22.7% increment from the prior year quarter.
Its profit attributable to the company came in at NT$580.60 million ($18.28 million). Also, its EPS stood at NT$0.80.
For the quarter ending December 31, 2023, IMOS’ revenue is expected to increase 12.4% year-over-year to $173.04 million. Over the past year, the stock has gained 10.5% to close the last trading session at $24.19.
It’s no surprise that IMOS has an overall rating of A, which translates to a Strong Buy in our proprietary rating system.
It has an A grade for Momentum and a B for Growth, Value, and Stability. Within the same industry, it is ranked first. Beyond what we stated above, we also have given IMOS grades for Sentiment and Quality. Get all the IMOS ratings here.
What To Do Next?
43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.
NINOY shares were trading at $9.75 per share on Monday morning, up $0.36 (+3.83%). Year-to-date, NINOY has gained 10.29%, versus a 19.74% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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