market folly

We're posting up notes from the Sohn London conference 2017.  Next up is Ross Turner of Pelham Capital who pitched a long of Infineon Technologies (ETR:IFX).


Ross Turner's Sohn London Presentation

Infineon is a global market leader in power semiconductors, it is listed in Germany with a market cap of 25bn euros. It’s main end markets are the 1. automotive sector 2. industrial sector 3. security sector.

Over the last 20 years the company has grown organically on average 9% per year which compares to the overall semi market which has grown at 6% Its main end markets are fast growing. Automotive and industrial are growing at 7% to 8% per year. Two-thirds of Infineon’s business is in the power segment where it has twice the market share of its next competitor. It also has an interesting business in sensors where it is a strong No.2.

One of the exciting things about the company is that its exposed to the electrification of the power train. There are two reasons why we are going to see more electric vehicles. Firstly, the OEMs are having to meet stricter targets. Secondly, the manufacturing cost of EVs is coming down dramatically. By 2020 or 2021 electric vehicles will become a serious consumer proposition in terms of total cost.

By 2020/21 expect EV’s to have more than 500KM of range and to have a rapid charge facility that could be as low as 10 mins. At that point everyone is going to want an electric car. There are supply concerns and materials concerns but nothing that can’t be overcome with a bit of time and investment.

As the power train is electrified more power semiconductors will be needed. EVs need four to five times more power semiconductors than cars with internal combustion engines. Fully autonomous cars and the stages toward them will require even more semiconductors.

Infineon can achieve more than double digit organic revenue growth for the next decade. It trades on 22x forward earnings. It has net cash on its balance sheet.


Be sure to check out the rest of the presentations from Sohn London 2017.