ASM Technologies Vs RIR Power Electronics: The semiconductor industry is often described as the “brain” of modern technology. It is the unseen tech that powers our digital lives, enabling everything from the devices in our pockets to the cars we drive and the entire infrastructure that this interconnected world has been built upon.
In today’s article, we will compare two such Indian Companies that are focused on manufacturing such intricate devices – ASM Technologies Vs RIR Power Electronics. Keep reading to know more.
Table of Contents
ASM Technologies Vs RIR Power Electronics
We will find out when the Companies were established, understand what they manufacture now, and look at where the semiconductor industry in India is heading.
We will then fundamentally analyze these Companies, compare their financials and other metrics against each other, and finally reach a conclusion.
Company Overview
ASM Technologies is primarily an Engineering design Company that also houses a semiconductor division, even RIR Power is predominantly a rectifier manufacturer that is looking to expand into semiconductor manufacturing. We will now read about both the businesses.
ASM Technologies
ASM Technologies Limited was established in 1992, by the Late Dr. S. Srikantan and Late Dr. R. P Shenoy. Today, it has a global presence in the USA, Singapore, UK, Canada, Mexico and Japan. It is currently headed by Mr. Rabindra Srikantan as Managing Director and M R Vikram as Chairman.
ASM Tech has over two decades of experience in Engineering Research & Development (ER&D). It has been providing world-class consulting and product development services with successful Offshore Development and Support Centres in India and Overseas for its global clientele.
During FY23, ASM received an award from a US-based company that is the world leader in commercial transmissions and hybrid propulsion systems. The award was in recognition of the on-time execution of a large project for Off-Highway Gearboxes. It also was approved to supply similar large high-precision fixtures to its plants in the US and globally.
The Company designed, manufactured, and successfully executed a project for a European company that is the world’s second-largest manufacturer of concrete pumps. The project involved a series of fixtures that were designed to accommodate multiple large-size components ranging from 4 to 10 meters long.
ASM is in the process of executing an important project supplying press tools to make laptop covers for a Company that is the market leader in smartphone chargers. They have supplied a large quantity of Assembly fixtures for capacitor assemblies.
ASM designed and manufactured a series of fixtures for transformer winding, PCB soldering, capacitor assembly, etc. for their charging devices.
Business Segments
The Company caters to a wide range of Industries from the Medical industry to the aviation and automotive industry. It also has a specific division focused on the design and development of Systems and sub-systems of semiconductors.
ASM offers services to Companies like Digital Engineering, Automation Solutions, Cyber Security, Virtual Reality, Driver Assistance Systems, Product Life Cycle, Internet of Things (IoT), and other IT infrastructure capabilities.
In the Automation category, it provides Robot-based automation solutions, Image-based solutions, and Overall system automation. These tools find application in Manufacturing, Product Inspection Assembly, Controller Panel, and related Hardware/Firmware.
In the Virtual Reality space, ASM Offers content Development, Storyboard, Visuals, 3D Graphics, and Animations, Hand gesture input integration with the VR environment, creating games to enrich the learning experience. These services find applications in Automotive, Medical, Semiconductor, and Process Industries.
RIR Power Electronics
RIR Power Electronics Ltd was established by Mr. Ruttonsha in technical collaboration with International Rectifier Corporation U.S.A. In 2000, it set up its Export Oriented Unit (EOU). In 2009, Orient Semiconductors was merged into RIR Power.
Today RIR is a market leader in “Power Electronics”. It has over 53 Years of experience and operations in 10+ countries. It is the only company in the private sector to manufacture Semiconductor devices right from the diffusion stage.
Now let us learn a little about what a rectifier is. A rectifier is an electrical instrument that converts alternating current (AC) to direct current (DC). It allows the current to flow in only one direction.
RIR’s product portfolio includes low-power to high-power devices and IGBT Modules that find applications in Welding, elevators, Battery Charges, Railways, Medical equipment, etc. The Company also manufactures high-current rectifiers that can be used in Hydrogenation, electroplating, Plasma Heating, etc.
Industry Analysis
The Engineering Manufacturing Services (EMS) industry in India has witnessed robust growth, driven by increasing demand for electronic products, government initiatives like “Make in India”, “Digital India”, PLI schemes, etc. to promote domestic manufacturing and to help foster a favorable investment climate.
Global demand is shifting from conventional fuels to alternative energy such as EVs and other eco-friendly electric applications. This has resulted in a new demand for semiconductors which forms a core for all electric run applications.
Various government policies such as Atmanirbhar Bharat, the launching of a Semiconductor policy, and the curb on imports; are all positive developments that would benefit the small businesses in the organized sector to grow & show better performance shortly
FY23 saw emerging technologies, like Generative AI and 5G shape the future of industries. Responsible business approaches, including embracing ESG, have gained traction.
Digitization and innovation will fuel growth with new opportunities in the years ahead. Technologies such as artificial intelligence (AI), Industry 4.0, augmented reality, virtual reality, machine learning (ML), and data analytics are providing numerous new opportunities for large enterprises.
Start-ups are developing new products and service lines, focused on improving efficiency and productivity. The government’s focus on expanding the domestic market through indigenization and self-reliance has led to capability building among Indian organizations towards domains such as Software Development, Product Management, and Manufacturing Engineering.
ASM Technologies Vs RIR Power Electronics – Financials
Revenue & Net Profit
ASM Technologies reported a revenue growth of 15% in FY23, growing from Rs. 192Cr in FY22 to Rs. 220Cr in FY23. Its profitability fell by 35%, falling from 14.6Cr in FY22 to Rs. 9.6Cr in FY23.
RIR reported revenues worth Rs. 57Cr in FY23, 35% growth from Rs. 42Cr. In FY22. In the last 5 years, the Company saw a rather slow growth of 7% CAGR. Its Net Profit grew at 27% CAGR due to an increase in margins. It reported an FY23 Profit of Rs. 6.7Cr growing by 137% from Rs. 2.8Cr in FY22.
When we compare both Companies, we realize that ASM is growing at a faster rate in terms of revenue, whereas RIR has a lead when it comes to turning a profit. This has been due to an expansion of its margins in the previous years.
Note: RIR Power Electronica acquired a new subsidiary in FY22. Hence, for fair Comparison, we have taken only standalone numbers for RIR, excluding numbers of the said subsidiary. However, the consolidated Revenue and net Profit of RIR are Rs. 57.33Cr and profits stood at 5.97Cr.
| Particulars / Fiscal Year | 2019 | 2020 | 2021 | 2022 | 2023 | 5 Year CAGR |
|---|---|---|---|---|---|---|
| ASM Technologies - Revenue | ₹88.03 | ₹92.01 | ₹137.39 | ₹191.67 | ₹220.41 | 26% |
| YoY Growth (%) | 5% | 49% | 40% | 15% | ||
| RIR Power - Revenue | ₹43.05 | ₹33.58 | ₹30.07 | ₹42.33 | ₹57.33 | 7% |
| YoY Growth (%) | -22% | -10% | 41% | 35% | ||
| ASM Technologies - Net Profit | ₹6.96 | ₹1.24 | ₹8.51 | ₹14.61 | ₹9.55 | 8% |
| YoY Growth (%) | -82% | 586% | 72% | -35% | ||
| RIR Power - Net Profit | ₹2.60 | ₹1.42 | ₹1.33 | ₹2.82 | ₹6.68 | 27% |
| YoY Growth (%) | -45% | -6% | 112% | 137% |
Profit Margins
FY23 Operating Margins of ASM and RIR were 9.54% and 16.88% respectively. RIR scores a clear win in terms of margins. This effect was already seen with the comparative profit growth of RIR.
Net Profit Margins of the ASM are dangerously low at just 3.24% in FY23, a 3-year low for the Company. These Margins are unsustainable in the long term. As for RIR, its margins are way better at 11.7%, which is higher than its 5-year Average.
| Particulars / Fiscal Year | 2019 | 2020 | 2021 | 2022 | 2023 | 5 Year Avg |
|---|---|---|---|---|---|---|
| ASM Technologies - Operating Margins | 6.20% | 2.58% | 12.30% | 10.97% | 9.54% | 8.32% |
| RIR Power - Operating Margins | 11.87% | 8.40% | 9.58% | 11.51% | 16.88% | 11.65% |
| ASM Technologies - Net Profit Margins | 7.96% | 0.76% | 6.26% | 7.25% | 3.24% | 5.09% |
| RIR Power - Net Profit Margins | 6.04% | 4.23% | 4.42% | 6.66% | 11.7% | 6.60% |
Return Ratios
The return on Equity of ASM Tech and RIR Power stood at 28.08% and 20% respectively. Return on Capital Employed comes to around 22% and 27% respectively for ASM Tech and RIR.
RIR again stands as a clear winner in this category as well. Return on Equity and Capital Employed figures of above 20% are good for a Company in a low-margin segment. ASM has to work on reducing costs to stay competitive.
| Particulars / Fiscal Year | 2019 | 2020 | 2021 | 2022 | 2023 | 5 Year Avg |
|---|---|---|---|---|---|---|
| ASM Technologies - RoE | 13.83% | 1.37% | 16.05% | 9.06% | 28.08% | 13.68% |
| RIR Power - RoE | 13.82% | 6.90% | 6.23% | 12.00% | 20.00% | 11.79% |
| ASM Technologies - RoCE | 15.65% | 5.16% | 20.82% | 14.00% | 22.00% | 15.53% |
| RIR Power - RoCE | 16.44% | 9.31% | 9.46% | 16.00% | 27.00% | 15.64% |
Debt Analysis
The debt to Equity of ASM and RIR stood at 0.58x and 0.97x respectively. Debt to Equity below 2x is considered as safe leverage for any Company. We see a trend of increasing debt in ASM Tech, while RIR has been decreased its debt, compared to the previous year.
Interest Coverage Ratios of ASM and RIR stand at 2.58x and 4.68x respectively. These figures raise a bit of stress on the Company’s ability to service its debt. Both Companies must work on increasing profitability to fortify against debt obligations.
| Particulars / Fiscal Year | 2019 | 2020 | 2021 | 2022 | 2023 | 5 Year Avg |
|---|---|---|---|---|---|---|
| ASM Technologies - Debt to Equity | 0.29 | 0.42 | 0.55 | 0.49 | 0.58 | 0.47 |
| RIR Power - Debt to Equity | 0.58 | 0.38 | 0.27 | 1.12 | 0.97 | 0.66 |
| ASM Technologies - Intereest Coverage | 13.53 | 2.11 | 5.85 | 4.2 | 2.58 | 5.65 |
| RIR Power - Interest Coverage | 4.58 | 2.98 | 4.19 | 6.82 | 4.68 | 4.65 |
Future Plans
ASM Technologies
- As per their Managing Director, the Company looks to transform from a design to a design-led manufacturing (DLM) company. It plans to substantially increase its infrastructure, production facilities, talent pool, and processes.
- ASM is setting up its 3rd Manufacturing Unit in the Industrial Estate in Guindy in Chennai, to diversify into the Electronic Manufacturing Services (EMS) segment. It will house a whole range of Japanese machining centers and other world-class tool room machines.
RIR Power
- The Company continues to focus on the high-power semiconductor devices business and foresees ample opportunities for growth in Export Markets.
- Visicon Power Electronics Pvt, a subsidiary of RIR is setting up a Silicon Carbide (SiC) wafers plant in Halol, Gujarat. The installation of the Epitaxy Reactor is completed and is undergoing trial runs. The plant is expected to start commercial production from Q4FY24 onwards.
Key Metrics
We have now understood both the Companies’ business as well as taken a good comparative look at their financials. Now let us look at a few Key Metrics.
| Particulars | ASM Technologies | RIR Power |
|---|---|---|
| CMP | ₹486.75 | ₹652.2 |
| Market Cap (Cr.) | ₹533.88 | ₹453.79 |
| EPS | ₹5.7 | ₹10.18 |
| Stock P/E | 86.81 | 68.87 |
| RoE | 10.42% | 22.00% |
| Book Value | ₹66.40 | ₹50 |
| Price to Book Value | 7.53 | 13.81 |
| Promoter Holding | 62.79% | 71.74% |
Conclusion
Having reached the end of our analysis let us look a both the Companies in Brief. ASM Technologies is a Company older by at least 8-10 Years. This led ASM to grow ~4x the size of RIR in terms of Revenue.
However, that is the only advantage ASM has over RIR. The latter has significantly better Margins, which have led to even better Return Ratios. This also leads to RIR growing its profitability at a faster pace compared to ASM.
Stock Prices of both ASM and RIR are quite expensive, coming in at 86.81x and 68.87x respectively. The premium is driven by the growth opportunities for semiconductor manufacturers across the globe. However, this growth is currently coming at a seriously high cost leading to extremely low margins.
So with this, we would be concluding with our article having compared their businesses and financials. Now which stock do you think is going to perform better in the long run? Do you think these Companies can justify high Price-to-earnings ratios?
Written by Nasir Hussain
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