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Analysis of Himax Technologies Inc.

Analysis of Himax Technologies Inc.

6 April 2022

Himax is a semiconductor company from Taiwan without manufacturing facilities, dedicated to display imaging processing technologies in China, Taiwan, the Philippines, Korea, Japan, Europe and the USA. The company operates in two segments: Driver IC and Non-Driver Products. Driver IC includes integrated circuits of display drivers (IC) and synchronization controllers that are used in televisions, laptops, monitors, mobile phones, tablets, cars, digital cameras, car navigation, virtual reality devices and other household electronic devices.

Himax was incorporated in 2001 and is headquartered in Tainan, Taiwan.

It is a relatively small company, it ranks 39th by market capitalization in the semiconductor industry. In 2018-2019, Himax had a negative cash flow, and in 2019 it also had a loss. However, over the past two years, financial indicators have grown dramatically: revenue increased by 2 times, net profit by almost 10 times.

Current multipliers:

P/E 4.6 forward P/E 4.5 (average current by competitors 27)
P/B 2.3 (industry average 7.7)
P/S 1.3 (industry average 10)
Debt $220 million with current operating cash flow of $388 million
Dividends 2.5% per annum
Stock Price: $10

The cash flow discounting model shows a fair price of $14.
Simply Wall Street values the company at $35.

As you can see, the company has no debt. At the same time, the estimate is about 5 times cheaper than that of competitors. The net margin on average in the industry is minus 3%, while for Himax it is 28%. The sharp increase in marginality last year is associated with the growth of the company’s indicators.

The stock is trading below the 20, 50 and 200-day averages. Which in itself is a good signal to buy. The 20 and 50-day MA are around 11.15, and the 200-day MA is at 11.86. A year ago, the company was worth more than $16 per share and then investors did not know how profitable the year would be. And now, after a strong growth in financial indicators, Himax is 35% cheaper.

Sooner or later, the shortage in the semiconductor market will begin to subside, and and so will the profit of Himax. Analysts expect a recession of the boom in 2023. However, before that, the company will still have time to earn and share with shareholders. Current dividend payments are only 12% of FCF and 11% of net profit. Thus, in 2022, we should expect an increase in dividends. The company also has negative net debt. We consider Himax a good investment, at least for the next year.

6 April 2022
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