If you want to build your cash-flowing empire and dive into the intriguing world of penny stocks, this is the ultimate report you’ll need.

The reason why I started this editorial with penny stocks is because the semiconductor stock that ace investor Mukul Agrawal is bullish on, used to be a penny stock not so long ago.

Back in 2020, when we first wrote about semiconductor stocks and how the theme is expected to pick up in the coming years, this semiconductor stock was trading at around ₹50-60 per share. In a year, it shot up by over 600% to ₹500 levels.

Right now, the stock trades at around ₹1,466, an all-time high.

So, without further ado, the stock in question is ASM Technologies.

About ASM Technologies

ASM Technologies is engaged in the business of providing consulting and product development services in the areas of engineering services and product research and development.

The company has a 50-50 joint venture (JV) with HHV group, which is slated to become one of India’s state-of-the-art semiconductor-focussed equipment manufacturing facilities.

The facility will be capable of designing and manufacturing semiconductor tools, sub-systems, system components, and providing field support. The management considers the facility a key growth vertical.

Further, in November last year, the company acquired the UK-based Semcon Engineering UK Ltd to strengthen its international footprint.

Apart from semiconductors, ASM also caters to hi-tech medical equipment, automotive, aerospace, enterprising storage, and networking consumer electronics, among others.

That apart, the company makes strategic minority investments in early-stage tech companies in India and abroad through its arm ASM Ventures.

It has also forayed into areas of virtual reality (VR), internet of things (IoT), and open edX platform management.

Mukul Agrawal’s Purchase

Mukul Agrawal, a prominent investor in India, is known for his microcap and smallcap stock picks.

His style of investment involves a mix of offence and defence, but he follows an offensive strategy most of the time, after doing proper analysis. He also keeps two separate portfolios for investing and trading.

Coming back to ASM Technologies, according to the latest shareholding pattern filed by the company just a few days ago, Mukul Agrawal has emerged as a new investor on its shareholders’ list.

Every quarter, investors holding over 1% stake in a company must share their portfolio moves as part of the company’s stock exchange filings. These filings can be goldmines, providing unique insights into recent decisions made by some of the best money managers in the market.

So, upon digging further, we found that Mukul Agrawal holds around 6.48% stake in ASM Technologies, which was worth around ₹107 crore as of 10 July.

This amount would have gone up as the stock is locked in 5% upper circuit today, that is, 11 July 2024.

ASM Technologies Share: What Explains the 200% Rally in 2024?

Just last year in May, ASM’s stock price was going down due to a decline in quarterly as well as annual earnings; its bottom-line and operating margins had fallen steeply.

Apart from that, its shares also came under pressure following the Russia-Ukraine war. For context, half of ASM’s revenue is derived from exports, with a high dependence on the US market.

Further, the company’s margins were also falling gradually on the back of higher employee expenses and other overhead costs.

Skip forward to 2024, and so far, this year, ASM’s share price has gone up by over 200%.

ASM’s Meteoric Rise in 2024

Most of the gains in the company’s stock in 2024 could be attributed to the semiconductor theme picking up substantially around the world, and also the largest chip giant NVIDIA’a climb towards becoming the world’s most valuable company.

NVIDIA’s rally has triggered a rally in most semiconductor stocks in India and ASM Technologies is no exception.

In 2022, ASM Technologies forayed into areas of virtual reality (VR), internet of things (IoT), and open edX platform management.

The company’s managing director, Rabindra Srikantan also highlighted in October 2022 that India has a lot of ground to cover in the area, and it should focus on manufacturing of semiconductors.

Meanwhile, in the case of ASM Technologies, its revenue declined by 7% in the first nine months of FY24, mainly on account of a reduction in the revenues from its top customer.

Further, higher interest outgo due to an increase in debt levels has also impacted its margins.

That apart, ASM’s strength lies in its main clients that include reputed customers from across the US and Europe who manufacture semiconductor equipment and network devices.

It is on the back of this strength that even though the company posted a loss in FY24, it is expected to turnaround the business soon following successive quarterly losses.

What Next?

With the Indian government looking pretty serious about domestic semiconductor manufacturing, ASM Technologies will be in focus in the coming months.

Its portfolio is spread across the semiconductor equipment ecosystem, and it has a good roster of clients.

The only concern is exposure, as around half of its revenue comes from the international markets, and any loss of a significant client would have a serious impact on its performance.

Overall, it remains to be seen how and when ASM Technologies charts a turnaround and picks up further momentum.

Happy Investing!

Disclaimer: This article is for information purposes only. It is not a stock recommendation and should not be treated as such.

This article is syndicated from Equitymaster.com