ON Semiconductor (ON): Notes From Investor Meetings - Mizuho
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Mizuho Securities analyst, Vijay Rakesh, reiterated his Outperform rating on shares of ON Semiconductor (NASDAQ: ON) after taking the CFO, Bernard Gutmannon, a non-deal roadshow. Key points include:
1) The FCS acquisition is expected to close any day now as they await some procedural details. The analyst believes the combined entity could drive revs/EPS of $5.1B/$1.41.
2) Overall, ON has seen stronger y/y order trends in July/August with key L-T focus markets being automotive, industrial, and smartphones.
3) The Automotive segment is ~36% of revenue now and, with FCS, Automotive will be ~28% of revenue. Automotive revenue has been growing 12-15% y/y while FCS growth is slightly slower at 7-9%. ON is seeing automotive traction with LED lighting, power train, sensors and ADAS. Automotive cameras are for forward collision warning (FCW), automatic dimming (in the Mercedes CLS at $6-$10 front-facing and $3-$5 rear-facing), and new cockpit cameras for drowsy driver assist. FCS (14% of revenue from auto) does mostly power discrete for hybrids and EVs.
4) Industrial will be ~28% of the combined ON/FCS and the highest GM/OM segment. The Industrial segment is driven by 1) building automation, 2) connectivity solutions, 3) machine vision, 4) security/surveillance, and 5) medical (10% of Industrial).
5) ON continues to see ~$75M in cost synergies in the first six months post close and $150M/yr in annual savings within 18 months (mostly from opex reductions).
price target of $16.00
Shares of ON Semiconductor closed at $10.74 yesterday.
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