Overstone International Value Fund on Elmos Semiconductor SE
Thesis
Elmos supplies automotive semiconductors and continues to execute operationally despite a share-price reversal after a strong preceding year. Second-quarter sales grew 11%, and the company is on track for more than 70% revenue growth by 2030, with around three quarters backed by design wins. The fund's thesis emphasizes a step-change in free cash flow as manufacturing is outsourced. Free cash flow is expected to exceed €120 million this year, more than the previous decade combined, and a potential takeover offers additional optionality.
“Our thesis rests on improving free cash flow, driven by the move to an outsourced manufacturing model.”
Key risks
- Sentiment has reversed after shares rose more than 80% over the preceding year.
- Forecast growth depends on design wins converting into sales.
- Free cash flow improvement relies on the outsourced manufacturing transition.
- Takeover speculation may prove unfounded.