1. Financial Analysis of NXP Semiconductors
Presented by -
Akash Gupta
Ramzi Abuljadayel
Vikas Venkatapathy on April 25, 2019

2. AGENDA Stock Overview Company Overview Macroeconomic trends
Industry Overview
Selected Financial Data
Projection and Valuation
Our recommendation

3. Stock Overview Recommendation: Watchlist
Market cap : B EPS : 6.72 Trailing P/E : Current Stock Price : Sector : Technology Industry : Semi Conductors
Currently Headquartered in Eindhoven, Netherlands.
Leader in innovative high-performance mixed-signal solutions.
Has 30,000 employees with operation in more than 30 countries.
14 manufacturing sites, with seven test and assembly sites and seven wafer fabs.
Yahoo finance :

4. Management Rick Clemmer Kurt Sievers Peter Kelly Steve Owen David Reed
Executive Director, CEO
Richard L. “Rick” Clemmer is the executive director, chief executive officer for NXP. He joined as executive director and chief executive officer on January 1, 2009.
Kurt Sievers
President, MD- NXP Semiconductors, Germany
Kurt Sievers is president of NXP. In addition, Kurt is Managing Director at NXP Semiconductors Germany GmbH. Kurt joined the company in 1995 and rapidly moved through a series of leadership positions.
Peter Kelly
EVP, CFO
Peter Kelly is the EVP and chief financial officer for NXP. Peter is responsible for Strategy and M&A, as well as ensuring a successful integration with Freescale. He joined NXP in 2011 and has 30 years of experience working in the technology industry.
Steve Owen
EVP Sales & Marketing
Steve Owen is executive vice president of Sales & Marketing for NXP.
He is responsible for developing a solutions-oriented team focused on company’s strategy: Secure Connections for a Smarter World.
David Reed
EVP Technology & Operations
David Reed is executive vice president of Technology and Operations at NXP.
He is responsible for the company’s Technology and Operations Group, which includes both silicon technology development and manufacturing of NXP’s internal and external operations.

5. Communication, Infrastructure and Other
Business Segments
Automotive
Industrial and IoT
Mobile
Communication, Infrastructure and Other

6. Revenue (in $ millions) growth by Operating segment
Company Overview
Revenue (in $ millions) growth by Operating segment
$9498
$9256
$9407
$5647
$6101
NXPI Annual Report 2018

7. Porter’s five forces analysis
High cost of production facilities
Dominance of existing market players
Significant investment in research and development required
Strong supplier contacts and distribution network of existing players
Threat of New Entrants (LOW)
Bargaining Power of Buyers (MODERATE)
Bargaining Power of Suppliers (LOW)
Threat of Substitutes (LOW)
Rivalry among existing competitors
(MODERATE)
Competes with multinational companies to “fabless” companies
Most industry players have a special product line to serve niche market.
Low backward integration of customers
Industry is dominated by small number of large players.
High switching costs
Low performance to price ratio of other products
IP protection prevents substitutes.
Silicon wafers, chemicals, gases, lead frames, substrates, molding compounds are the main raw materials.
The moderate size of individual suppliers - Diffusion of risk over many companies
Low level of forward integration of suppliers 

8. Strong Customer base
Diversified presence in several countries
Declining market share of NXP in segments other than automotive.
Willingness of customers to switch to latest technology
Semiconductor content per vehicle is also increasing to address applications such as engine management, fuel economy improvement, driver comfort, convenience and user interface.
Rapid Technological Changes
Shortage of skilled human resources
Intellectual property protection

9. Automotive #1 in Automotive semiconductors
The combined portfolio after merger with Freescale is complementary
ADAS: Radar, Vision, V2X
Electrification of Vehicles: Automotive battery management systems for Hybrid vehicles
Domain
Market Position
Products
Chassis & Safety 1
Stability control & Airbag crash detection
Power Trains 2
Engine management systems for improved fuel efficiency and reduced emission
Car Entertainment
Audio amplifiers and radio solutions
In vehicle Networking
CAN, LIN, FlexRay Standards (Communication of various subsystems and networks)
Secure car access
Passive keyless entry
NXPI Annual Report 2018

10. Secure Identification Solutions
Domain
Market Position
Products
E-Government 1
Chip-based cross-border passports, drivers-licenses, health
cards and other government sponsored identification documents
Transport & Access Management
Mass transit and employee identification cards
Banking 2
Contact, contactless and dual-interface bank cards (Chip based cards)
NXPI Annual Report 2018

11. Secure Connected Devices
Semiconductor-based technologies for connected devices
#1 NFC/Secure Element
#3 broad based MCU
Growth drivers:
IoT applications E.g. Smart home, health, cities, wearables and many more
Mobile payments
NXPI Annual Report 2018

12. Secure Interfaces and Infrastructure
Perform tasks related to control and management of digital data.
#1 in RF Power
#2 in communication processors
Products:
Smart Antenna solutions focused on high-performance RF amplifiers.
Wireless-infrastructure and communications processors (For LTE, 5G)
Growth drivers:
Fast wired USB-C and fast Qi wireless charging in mobile applications
Audio enhancement features in mobile phones.
NXPI Annual Report 2018

13. Industry and Macro Analysis

14. Semiconductor market in the US from 2008 to 2019
Growth in automotive industry.
Radar chips
Advanced Driver Assistance Systems
Hybrid and Electric Vehicle Systems
In-vehicle Networking
LED lighting
Fuel economy
Emissions Reduction
General body and interior

15. Semiconductor consumption market share worldwide
Year
2015
2019*
China
58.5%
60.5%
USA
12.0%
12-14%
The figure shows the worldwide semiconductor market from 2003 to 2019, by region.

16. Global semiconductor industry revenue growth from 1988 to 2019
Semiconductor sales revenue worldwide from 1987 to 2019

17. Compound annual growth rate of the main semiconductor target markets from 2016 to 2021
Capital spending in the global semiconductor industry from 2010 to 2020 (in billion U.S. dollars)

18. Ratio Analysis

19. Key Ratios Total Debt Net income Equity Total Sales Net income
Total Assets
Net income
Avg. Shareholders’ Equity

20. Key Ratios Greenblatt Ratio # 1 = EBIT/Tangible Assets
Greenblatt Ratio # 2 = EBIT/Enterprise Value

21. Du Pont Analysis ROE = Net Profit Equity Net Profit Pre-tax Profit *
EBIT
Sales
Assets
Equity

22. Comparable Analysis

23. Comparables Evaluation
Company
Market Cap(B)
EV/EBITDA 2018
P/E
Infineon Technologies AG
26.95
12.1
21.9
Advanced Micro Devices Inc
30.25
25.68
36.8
Microchip Technology Inc
23.26 14
14.5
Analog Devices 42
16.27
19.8
Texas Instruments Inc
109
15.64 22
Maxim Integrated Products Inc
16.3
16.9
23.27
Skyworks Solutions Inc
15.44
8.33
12.63
NXPI Adj. EBITDA 2018: 2,697M
Average EBITDA multiple 2018:
15.3x
Total debt: 7,354M
Non-controlling interest: 45M
Total Equity Value: 33,833M
Estimated Share price: $104

24. Company Valuation

25. Key Assumptions for the next 5 years
Automotive grow by 6.5% due to ADAS and Electric vehicle growth in demand. (Company guides 7-11%)
Devices grow by 8% due to growth in IoT, mobile payment, smart wearables, etc.
Interface and infrastructure will stay at low growth of 1% due to fast wired USB-C, mainly fast type charging
R&D will stay high at 17.5% of sales in the first two forecasted years and expected to slow after that.
WACC is 12.5%
Terminal growth of 3%, matching Benjamin Graham Growth

26. DCF Valuation Estimated share price: $48 Current Market price:
as of 4/15/19
$100

27. Recommendation ADD TO WATCHLIST $81 per share Fair Price Estimated:
Comps: $104 x 60%
DCF: $ 48 x 40%
$81 per share
ADD TO WATCHLIST
The company is heavily investing in IoT and ADAS automotive.
These are all successful products and already in the market, but consumers are taking their time to respond to these products.
NXPI is known for its early investment in innovations. It may be overvalued today, but once the demand in automotive sparks, its value should soar
We recommend to keep this company in the watchlist

28. Q&A