SPEL SEMI CONDUCTORS LTD.
EARLIER KNOWN AS SPIC ELECTRONICS LTD.
BSE SCRIP CODE NO. 517166
SPEL Semiconductor Ltd. is a company belonging to SPIC group of Tamil Nadu. Their other group companies are SPIC (earlier Southern Petro Chemical Industries Ltd.), Tamil Nadu Petroproducts, Manali Petro Chemicals Ltd., Henkel India Ltd., SICAL Logistics, to name a few.
The company was initially called SPIC Electronics but has since been renamed as SPEL Semiconductor Ltd.
SPEL Semiconductor Limited is the leading one-stop turnkey Wafer Sort, IC Assembly & Test subcon facility in India. Established in 1988 and headquartered in Chennai, SPEL had been serving the local market from 1988 to 1994. Having established a track record at home, SPEL turned its attention to the more demanding global market in 1995. It has since been exclusively serving the Silicon Valley and other parts of the world for over 12 years now. SPEL focuses on Lead frame based Packages - both Surface mount & Through hole.
As a specialty, SPEL offers onsite & offshore Test Engineering support to Customers. SPEL ensures better interaction & services to Customers through a Sales & Technical support office based at Santa Clara, USA.
OUR ANALYSIS
SPEL was earlier reeling under regular losses and there were accumulated losses. During the FY 2006-07 the performance of the Company has improved multifold and the entire accumulated losses of the Company have been wiped off during the first half of FY 2006-07. THUS THE COMPANY PRESENTS AN EXCELLENT TURN AROUND STORY. SINCE THE SECOND HALF OF 2006-07, THE COMPANY’S PERFORMANCE HAS IMPROVED SEQUENTIALLY. During the year under review, the Company has been chosen by theglobal Customers for their strategic investments. Management is cashingon this opportunity to rope in more Customers under this plan ofoperation. This will not only ease the Company’s fundingrequirements, but will also make the Customer committed for volumes. During the year under review, Hon. Finance Minister, Mr. P.Chidambaram, inaugurated the Company’s launch of a new Leadless Moldedpackage (LMP). This is a niche package and will generate higher revenueand PAT. This package will go into applications where size, weight,and performance matters and has a good market potential. Towards theend of the year under review the Company has successfully obtained aTerm Loan from IOB to the tune of Rs.17 Crores. The Company has applied to Central Government for formal approval toestablish the Special Economic Zone after getting the StateGovernments approval. The Company is looking at various options ofestablishing SEZ including, collocating some of the outside Companies,whereby optimal benefit and its vision is achieved. SEZ will be arevenue generator to the Company. SEZ will accommodate some of theCompanies who have expertise in high end packages. This will not onlycomplement the Company’s activities but will also address logistics
and eco system part of the industry.
SPEL ICs are used globally in consumer electronic applications (such as
Cell Phones, PDAs & Digital Cameras), Desktop PCs, Notebook Computers
& Automobiles. The company was earlier supplying to Indian markets but
presently, the major buyers are from abroad. As is the case with all export
companies presently, the adverse rupee dollar rate is taking its toll slightly.
The newly installed packages have considerably increased
SPEL`s attractiveness globally. The sustained performance will drive SPEL
to excel due to the strong demand experienced by its existing Customers.
Hence the outlook is bright.Being the First & only semiconductor IC Assembly & Test Company in India,
SPEL has consistently delivered as per its commitments and has hence
been able to move ahead in its growth plan. SPEL is appreciative of the
Government’s efforts toward coming up with the Semiconductor policy, and
hopes that the policy will be made attractive enough to develop the
eco-system within India.The Government’s Semi Conductor policy is very favourable and it is expected
that SPEL will benefit most from it. Besides the above, the company’s
SEZ venture near Chennai will be an added advantage. This will greatly
boost up the profitability in long times to come.
The company has shifted its office from a posh central Chennai location
to the factory premises and it is widely believed that this will result
in substantial cost cutting efforts.
All the above factors show a strong and bright future for SPEL.With an increasing Customer base to its credit, SPEL is surging ahead
speared by an experienced Management, dedicated Employees, excellent
vendor relations and a very good profitability track record.
The company has come out excellent 2nd quarter (Sept. 07) numbers. The net profit has grown by 60% on year on year basis. Once the full year’s profits are out, the EPS for FY 2008 could be well over 2. The present prices have discounted the future EPS considerably and the present valuations are very cheap.
The Operating Profit Margin (OPM) and Net Profit Margin are growing sequentially on QOQ basis. With the increasing trend in all parameters of profitability, the share price will move from the present levels of around to at least 40 by April 2008 (by the time full year’s results are announced).
It is believed that the company is going to place shares with foreign investors within one year. The price is not decided yet, but it is believed that it will be at a premium. This premium will add up to the reserves and consequently the book value and share price will show an appreciation. This factor and the SEZ plans near Chennai will give a further impetus to the share price movement.
We are, therefore, bullish on this stock and give a strong recommendations to purchase the same at the current price of around 23. The share saw a year’s high of 37 and low of less than 20. It is, therefore, almost near the low levels. If the share is held for at least 2 years, we can expect a price levels of at least 60.00.
Presently the share is in T segment which means all transactions should be delivery based. There will be no operator driven movement. The circuit filter level will be 5%. This means all the transactions are showing accumulation. Once the share is moved from T segment to normal transaction cycle, the price will start inching upwards.
MAJOR PLUS POINTS
i) Promoters are holding fairly high level of shares (over 56%). This is considered good.
ii) The company’s products have found increased acceptability the world over.
iii) It is an excellent turn around and growth story.
iv) The company has a subsidiary in USA which is looking after the marketing needs. This takes care of the logistics in export related activities.
v) Rupee has appreciated considerably. At some point of time, dollar will appreciate or the Government will have to intervene to keep the parity rates to favour exporters. This will result in more profits for the Company.
vi) The SEZ, if fully operationalised, will provide an excellent platform for the company to increase its overall economic activity.
OUR OVERALL VIEW In our overall assessment, we find that the positive points outweigh the negative points. Kindly take into account the following article :
So, the share can be accumulated with a clear holding period of 2 years.
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13 comments:
VERY GOOD ANALYSIS DONE BY KASHIWALA. I WAS ALREADY HAVING 2000 SHARES. I HAVE PURCHASED 1000 MORE SHARES AFTER GOING THROUGH MONEYCONTROL BOARD.
I HAVE ALSO BEEN TRACKING YOUR POSTS IN NOIDA TOLL. PLEASE KEEP IT UP.
Good study. I have purchased 1000 shares at Rs23.50. Thanks to Mr. Kashiwala.
Great Analysis Kashiwala ji. Many thanks for same. Keep it up!!
Excellent analysis Kashiwala .I had purchased 500 shares.Kindly keep your good work going on for novice investors like me.
We expect a ten times increase in bottomline in 2 years. Therefore our 24 month target is atleast Rs 230/-
This is a multibagger and therfore accumulate.
India set to become hub for ATMP
25 Dec, 2007, 0331 hrs IST,Sreekala G, TNN
Economic Times
HYDERABAD: India is on course to become the hub of assembly-test-mark-pack (ATMP) facilities. While existing players are set to invest huge sums to expand their operations, new players are also showing interest in setting up ATMP units. ATMP facilities led the development of semiconductor ecosystem in countries like Taiwan and it could trigger the same effects in India as well.
Estimates suggest that global ATMP market serviced by third-party vendors is about $40 billion. It is set to clock 8% growth next year. “We cater to only less than 1% of this market. With countries like Taiwan and South Korea saddled with problems of wage inflation, China unable to provide IP protection, India could become the hub of ATMP work,” says SPEL Semiconductor CEO Sam Varghese. SPEL, considered to be the pioneer in the ATMP facility in India, has been operational for the last 12 years.
The company has a facility in Chennai and is looking at doubling its capacity. “At present, we have the capacity to assemble and test over 420 million ICs a year. By January, we will increase the capacity by 30% at an investment of $5 million. We are also planning to invest another $20 million by August next year to double the capacity,’’ says Varghese.
The $12.8-million firm is also looking at increasing its clientele. It has about 30 active clients and it provides turnkey solutions to them including sorting of wafers, testing, assembling and packaging. SPEL’s end customers include Sony, Samsung, Nokia and Motorola.
“After the capacity increase, our existing clientele will be able to provide us with 50% of the work and we expect the rest to come from new customers,” he said. Bangalore-based Tessolve services, another post-fab services firm is also planning to expand its facility. As part of this plan, the company is looking at acquiring about 35 acres near the proposed 1,200-acre fab city in Hyderabad for setting up its third production house at an investment of over $50 million.
The company has an ATMP facility in Bangalore and is in the process of setting up a second facility in Chennai. “Hyderabad will help enhance our customer base in the country as it will be close to a semiconductor ecosystem. Our Bangalore facility services about 18 clients,’’ said Tessolve Services CEO P Raja Manickam. The company’s 50-acre Chennai facility will be operational by August next year.
Dear all:
This endorses the recommendation, study, analysis and views of Mr. Kashiwala.
Let reports come from all sides.
P K Pande
Here is the link guys
http://economictimes.indiatimes.com/Infotech/Hardware/India_set_to_become_hub_for_ATMP/articleshow/2649358.cms
Hi, I would like to get in touch with you Ajay regarding SPEL Semicon. I am a journalist with a leading business newspaper, so could you kindly contact me at malovika@gmail.com
Gaining International Attention
Geographic hot spots. Europe’s economic growth was strong in 2007 and Productronica was busy (42,000 attendees) in November, an indicator of the economic strength both of the continent and many material and equipment suppliers. The mood was positive, as it was at the December SEMICon Japan show (110,000 attendees). Manufacturing solar cells received attention at both shows.
Recent Indian government incentives for semiconductor manufacturing and assembly are generating growth in assembly and test capacity. Some companies also may be turning to India for low-cost, scaleable assembly solutions, in the wake of recent product recalls of Chinese-made goods. Demand for semiconductor packaging assembly and materials manufacturing in India is driven by the desire for export revenue and growing consumer demand from the Indian middle class, numbering more than 300 million. TV and appliance production is increasing. Telecommunications is a big growth area in India, with major cellphone makers such as Nokia supplying the domestic market. Major EMS providers, including Flextronics, Jabil, Celestica and Foxconn, have located plants in India; some are expanding. At least 22 Japanese companies, including Suzuki, Honda, Sony, Matsushita and Mitsubishi, have announced plans to invest in India, and special areas have been established for these companies.
Semiconductor manufacturing and assembly in India is predominantly for bipolar devices. Companies such as Bharat Electronics (BEL), Continental Device India Ltd. (CDIL), and SPEL Semiconductor are major assemblers for imported and domestic components.
With word of Intel’s pending assembly facility in Vietnam, interest in establishing manufacturing facilities there has risen. As many as six PCB operations are in Vietnam, while at least one major probe card supplier, SVProbe, has a large operation there. Many companies are announcing new investment or expansion. Hon Hai, the world’s largest EMS company, is quintupling its planned investment in Vietnam to $5 billion, reflecting the Southeast Asian country’s growing appeal to high-tech manufacturers.2 Under targets set by the Vietnamese Ministry of Industry and Trade, key exports include textiles, garments, crude oil, footwear and electronics. The country is expected to export $3.6 billion worth of electronics in 2008, 50% more than in 2007.3
With growth rates exceeding 10% for many years, China’s economy may be overheated. An 11.5% growth rate is projected for 2007, and the picture is expected to look rosy through the Summer Olympics in Beijing. However, China’s bubble economy is creating inflation that could threaten its long-term economic growth. Real estate and stock prices have soared; real estate speculation is at an all-time high, and the government is responding by raising interest rates and taking other measures to curb lending and slow investments in shopping malls, factories and office buildings. The government fears a glut of unneeded projects could lead to bank loan defaults and spur a debt crisis. Some of these decisions take place in a closed-door economic conference held by Communist Party leaders each December to draft policy for the coming year. Slowing growth is tricky in China, where maintaining a rising standard of living and lifting millions from poverty is key to political stability.
References
E. Jan Vardaman, “The Sun Shines for Semiconductor Equipment and Material Makers,” Circuits Assembly, July 2007.
Wall Street Journal, Aug. 29, 2007.
HANOI, (Xinhua via COMTEX), Oct. 10, 2007.
Xinhua via COMTEX, Sept. 12, 2007.
The Daily Yomiuri, “China to Tighten Monetary Policy, Control Lending,” Dec. 6, 2007.
Economist(.)com, Dec. 11, 2007.
E. Jan Vardaman is president of TechSearch International, Austin, TX; jan@TechSearchInc(.)com. Her column appears bimonthly.
The article was titled Have We ‘Mortgaged’ Our Future?
By E. Jan Vardaman
Tuesday, 01 January 2008
LEDs and solar energy are among the bright spots
Appeared in circuitassembly(dot)com
Chip makers line up $600 mn for assembly units
SPEL is looking to raise $5 mn of debt by July and $20 mn more in 2009-10 as it expands
Malovika Rao
Bangalore: India’s efforts to become a chip manufacturing hub may still be restricted to plans and blueprints but the country is attracting significant investments directed at setting up facilities to assemble, test, mark and package chips, with companies such as SPEL Semiconductor Ltd, SemIndia Inc., and Tessolve Inc. looking to invest $600 million (Rs2,358 crore) over the next three years in such so-called ATMP facilities.
And analysts say that in countries such as Taiwan, Malaysia and Singapore, ATMP facilities have served as a precursor to the development of chip making or fabrication. Companies operating in the ATMP space estimate the size of the industry at $20 billion, and its growth at 4.2% a year.
This year will see at least two ATMP facilities beginning operation in India. While SemIndia’s is to be completed by the end of the year, Tessolve’s is expected to be completed by September. The two projects were announced in 2005.
“On average, globally competitive ATMPs, such as the ones in Taiwan, have sales in the range of $3-4 billion. Compared with that, India has a long way to go and we are (account for) less than 1% of the global ATMP market. But with announcements of other ATMPs and the fab city (in Hyderabad), we can expect the supporting semicon(ductor) ecosystem to flourish,” said D. Balakrishnan, chief operating officer, SPEL, which ended 2006-07 with revenues of Rs53.9 crore.
Chennai-based SPEL (formerly SPIC Electronics Ltd) is the country’s only commercial semiconductor chip assembly and testing company. In a bid to be globally competitive, SPEL planned to invest $286 million in a special economic zone (SEZ) near its existing facility in Chennai.
However, despite securing necessary approvals from the Centre, the company has put its SEZ plans on hold till 2009 citing procedural delays.
Meanwhile, SPEL is looking to raise $5 million of debt by July and another $20 million of debt and equity in 2009-10 as it expands its existing capacity. The company aims to almost triple its capacity from 435 million units per annum now to one billion units per annum in 2009-10.
SPEL has already raised $7.7 million in 2007-08 with $2.2 million coming from California Micro Devices Corp., and the rest from Indian Overseas Bank. It has 29 active customers, including Fairchild Semiconductor Corp. (Malaysia), California Micro Devices Corp., Alliance Semiconductor Corp. and Taiwan’s O2 Micro.
Not far from Chennai, in Sriperumbudur, the construction for an ATMP facility by the San Jose-based chip assembly and testing firm Tessolve begins next week, nine months behind schedule. V. Veerappan, co-founder and member of the board of Tessolve, said “the first two lines of the ATMP will come up by September or October this year.”
He added that the company has “secured the first round of funding of $30 million two months back from investors in US,” and expects a “second round of funding of $50 million to come in within the next six months.”
Tessolve’s $200 million facility will have the capacity to produce three million packaged units a day. The company already has an engineering facility in Bangalore where it offers testing services. SemIndia’s $100 million ATMP facility at the proposed $3 billion fab city in Hyderabad has been delayed too. According to B.V. Naidu, managing director of SemIndia Systems Pvt. Ltd, this facility will now be functional only by late 2008.
India becoming magnet for chip manufacturing investment
10th January 2008 - By Staff Writer
Seemingly not content with cornering a fair share of the market for offshore software applications development, India is now looking to become a manufacturing hub for the chips that power those programs.
According to a recent report from Livemint, the sub-continent is starting to attract significant investments for building new chip making assembly, testing and packing facilities.
A trio of Indian chip makers, SPEL Semiconductor, SemIndia and Tessolve, are looking to pump in $600m (Rs 2,358 Crore) in building such facilities. Livemint's report says that two chip assembly plant announced by SemIndia and Tessolve will start operations this year, wheras SPEL Semiconducor is an already eatablished player.
Today, India has a fledgling chip manufacturing sector that accounts for less than one percent of the global market.
India is competing with other Asian countries like Taiwan, whose chip makers already churn out $3-4bn worth of chips sales per year.
"Compared to that we have a long way to go," said D. Balakrishnan, COO of relative startup SPEL, which is also looking to invest $286m in expanding its existing facility in Chennai. However sticky approval and procedural delays have forced the company to hold back until 2009.
In its bid to become a global chip player, SPEL is aiming to triple its capacity from 435m units per year to 1 billion by 2010. Interestingly it has also received $7.7m funding including funds from US firms like California Micro Devices. Right now SPEL has around 30 customers including FairChild Semiconductor, Alliance Semiconductor and Taiwan's 02 Micro.
Tessolve is also breaking ground on a new chip assembly and testing facility in the city of Sriperumbudur. The work has started nine months late but Tessolve hopes the $200m facility will lift capacity to 3 million packaged units per day.
Like SPEL Tessolve has also recently secured funding, to the tune of $30m, and expects to close a second round worth $50m in the first half of 2008.
Tessolve also runs an engineering and testing facility in Bangalore.
Meanwhile SemIndia is also planning to build another $100m facility in Hyderabad, though it is reported that project has been delayed as well.
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