The demand for semiconductors will rise in the coming years. The government has announced the Semicon India Program and sanctioned funds under the PLI scheme to make India an influential hub for semiconductor manufacturing.
So, investing in semiconductor stocks in India may be beneficial. On that note, we discuss the best semiconductor stocks in India. This will help you make wise investment choices.
Considerations Before Opting For Semiconductor Stocks In India
Investing in a high-end stock may be a difficult decision. Without evaluating the key factors before investing, it may lead to losses. Therefore, before investing in semiconductor stocks, investors should consider the following factors:
- Observe if the company's revenue is increasing. You need to be able to convert sales into profits. You should consider investing in companies with good profit margins. High-margin companies can also reinvest in R&D to improve and facilitate their operations.
- Even though the government is working persistently to make India a global semiconductor hub, the ecosystem will take some time to develop, sustain and grow. In these cases, companies devote several resources to research and operations, driving up costs and limiting profits. Therefore, the recommendation is to invest with a long-term view.
- A company's Return on Invested Capital (ROIC) demonstrates its capacity to generate profit from the debt/equity raised. A high ROIC says investing in a particular stock is likely a good investment. Thus, choose a semiconductor company with a high ROIC.
- The company's finances must be sound. Review balance sheets, income statements, annual reports, cash flow statements and other important documents to analyse the company's past and current performance. This will give you more clarity and help make sound investment decisions.
- The semiconductor industry is appealing due to its rising market penetration and high growth potential. Investors are advised to adhere to an appropriate plan, obtain the necessary background knowledge, consider their risk appetite and invest accordingly.
- Recommendations, tips and unsolicited advice should not be taken at face value. Please consult a financial advisor if necessary. However, invest only after thorough independent research of semiconductor stocks.
Top Semiconductor Stocks In India
Here are some of the best semiconductor stocks in India:
Tata Elxsi Ltd
Tata Elxsi works on computer software and hardware design and development. The company was founded in 1989 and is divided into two divisions: support and software development and services and system integration. Tata Elxsi has a market capitalisation of Rs. 38,716 crore. The stock's one-year return is 1.68%, and its five-year CAGR (Compound Annual Growth Rate) is 498.72%.
ASM Technologies Ltd.
The company provides engineering consulting, product research, product engineering, and development services. Its services include automation solutions, the internet of things, compromise assessment digital engineering, robotics, and driver assistance systems. In 2022, the company earned a total revenue of Rs. 192 crore. The stock has a P/E ratio of 42.41, an EPS of 11.84, and a profit of 14.61 crore in 2022.
SPEL Semiconductor Ltd.
Spel Semiconductor Ltd. was founded in 1984. SPEL is a strong ally to several semiconductor contract manufacturers and is considered credible by many companies in the semiconductor industry. Furthermore, it is India's sole and primary company to operate both a test facility and a semiconductor IC assembly facility. As a result, it frequently appears on lists of India's best semiconductor stocks. The company's market capitalisation is Rs. 232 crore. The stock has a 1-year yield of 25.57% and a 5-year CAGR (Compound Annual Growth Rate) of 179.01%.
Moschip Technologies Ltd
Moschip Technologies is a system design and semiconductor company specialising in mixed-signal IP, turnkey ASICs, IoT solutions, semiconductors, and product development for medical, automotive, consumer electronics, networking, telecommunications, defence, and aerospace. The company was founded in 1999. Moschip Technologies has a market capitalisation of Rs 1,154 crore. Its 1-year yield on the stock is -5.17% with a 5-year CAGR (Compound Annual Growth Rate) of 60.16%.
Dixon Technology
The company was founded in 1993. It is a service provider for electronics manufacturing. It makes consumer durables, specifically mobile phones, LED TVs, CCTV security units, washing machines, and other items. In terms of strengths and weaknesses, the company has demonstrated good profit growth of 38.66% over the last three years and revenue growth of 36.93%. The company's ROE and ROCE over the last three years have been 22.60% and 30.83%, respectively. On the other hand, it has a very high PE of 159.95.
Ruttonsha International Rectifier Ltd
Ruttonsha International Rectifier is a power semiconductor manufacturer founded in 1969 and has partnered with US-based International Rectifier for over 50 years. The company's market capitalisation is Rs 261 crore. Its 1-year yield on the stock is 24.68%, with a 5-year CAGR (Compound Annual Growth Rate) of 517.47%.
Conclusion
India's Semicon Initiative, boosted by the Indian government's initiative of Atma Nirbharta in the electronic chip and semiconductor market, has seen an investment of Rs. 76,000 crore to expand and improve India's semiconductor manufacturing ecosystem. Semiconductor stocks are popular with investors because of their history of delivering consistent returns. However, carefully choosing stocks can yield good returns in the future.
Disclaimer
The investment options and stocks mentioned here are not recommendations. Please go through your own due diligence and conduct thorough research before investing. Investment in the securities market is subject to market risks. Please read the Risk Disclosure documents carefully before investing. Past performance of instruments/securities does not indicate their future performance. Due to the price fluctuation risk and the market risk, there is no guarantee that your personal investment objectives will be achieved.