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MosChip Semiconductor: What’s the story about?

April 6, 2008

When I first started writing my takes on the business world, I didn’t exactly decide to talk about stock specific information. But MosChip Semiconductor had been a nice stock to watch, for quite some time, the US recession not withstanding.

Business Model: The company’s business model has been markedly different from what we have seen for quite some time from an IP-oriented company here in India. MosChip USA is a wholly owned subsidiary of MosChip India. The IP development done in Hyderabad, India is licensed to MosChip USA which in turn generate sales from the US market. The business is highly scalable and has potential to generate(and to a certain extent did enjoy) high profit margins due to its geographical and economics of location.

The Bouquet, as offered: MosChip India is a completely fabless ASIC development company, with its core interests in connectivity solutions. Its interest are primarily in USB2.0, PCI and network connectivity. With increasing PC penetration in the third world countries including countries like India, China and others countries of Asia, plain vanilla connectivity solutions like USB2.0 (MCS7xxx) can prove to be a revenue churner. Recently it has released its own USB2.0 to Ethernet controller and quad serial port device. Apart from the ASIC focus, it is also focussed on delivery of device drivers, embedded firmware and engineering and reference platforms(read :service)

The Market as targeted: With no WUSB connectivity solution yet on the product sheet, the company looks to have been targetting the embedded systems market which has seen quite a resurgence in this part of the world. It is one of the fastest growing markets worldwide with forecast as 78billion USD worldwide coming from ASIC department. In Asia alone, it is poised to grow by 15%.

Management: With a fairly stable and strong management going on, since its inception, there seems to be a particular focus on their development process. The Management is composed of 3 people who had a good career in ASIC development in US , either professionally or academically. The management seems to be focussed on one niche market and seems to be handing the challenges well.

Technicals: The Heart of the Matter: In the adjoining figure is shown the chart for MosChip Semiconductor. It has just touched an all time low of 13.00 and has already started an upward movement in the past 2 weeks. It is hovering near to the first resistance level of 20.92. The stock is trading on Sensex at 20.90 at the close of 4th April 2008. Its annual report is not yet out, which will confirm the fundamental situation of the stock. It has rallied smartly and is currently showing a bit of trader’s remorse near the resistance level. If breached comprehensively then the stock is expected to rally in around 1-2 months time to 29.00. The volumes are significantly low and hence can be susceptible to operator manipulations. Part of the faith in the chart comes through the strength it has shown in the past 2 weeks in he midst of increasing volatility in the Sensex. At current levels Williams Oscillator is showing overbought and may show some weakness in the coming sessions.

MosChip Semi

Fundamentals:The Crux of the Matter:

Pending as results 2007-08 not yet announced. [Upcoming]

If you had been, thinking of entering this stock, levels of circa 23 will be a good point to enter, which will effectively confirm its bullish nature. Over the period of a year it should give good returns.

Verdict: Long at current levels for entering fresh, if you are holding it then book loss in the horizon of 7-8 months.

Risk Level: Moderate to High in short term, Moderate in long term.

News to watch out for: Any news on new IP development especially on WUSB. [Note to self: start following their R&D plans]

[Disclaimer: I do own shares of MosChip semiconductors and this is not an analysis report, but just an opinion. Do not construe this as professional advice and refer your asset manager before any investment decisions you make]

You can reach me at sohamdas [at] gmail [dot] com

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2 Comments leave one →
  1. sandeep permalink
    November 22, 2008 9:01 am

    dear,

    do u have any updated view on moschip. Forget the short term crunch , what’s the development if we are long term investor.

  2. Soham Das permalink*
    November 22, 2008 11:37 am

    Dear Sandeep,

    Interesting question.

    As I have no qualms in accepting, my report on Moschip in April seems to be a bit optimistic in the given circumstances. But a few things, seems to have hold. It never did breach 23 levels, and the most resistance it has faced is at 19-21 levels.

    So from a strict technical perspective I would watch those levels closely and try to time my entry with those levels.

    Now from a fundamental perspective, I apologize for not going through the balance sheet. Expect some development on this side soon.

    Now, what if we are stuck in this scrip?

    Short term: Depends on your appetite:

    Long Term: Definitely I am bullish on long term on Moschip, for its targeting the embedded domain. If it had been anywhere else I would have been running for cover. In the years to come, our embedded world will expand exponentially and Asia will be in the eye of the expansion.

    So is it a buy? I wont prefer so at this level[being a technical guy more than fundamental]
    Is it a hold? Yes, if you are ready to weather the storm 🙂

    [A strict technical perspective: If you are indeed inclined to hold it, then hedge it against a scrip which will show some returns. There are a few interesting scrips, but I am watching the developments closely]

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