Analysts cited the company's strong fundamentals and say its product portfolio looks better than that of its competitors. They also applauded Kemet's focus on MLCCs, or multilayer ceramic capacitors, for auto and industrial applications, in a niche market.
While the capacitor supplier is experiencing head winds similar to competitors (weakening demand, inventory correction), fundamentals have held up significantly better than comps due primarily to its product portfolio. Specifically, in multi-layer ceramic capacitors (MLCCs), Kemet focuses on high-capacitance, large-case size MLCCs used primarily in automotive and industrial applications, a niche part of the market that several top competitors are de-emphasizing. Growth in MLCCs (34% of sales) should offset weakness in other product segments, which we are modeling down double-digits in FY20.
In addition to its "niche position in MLCCs helping it weather the storm, analysts wrote the company is making transformative moves as well.
Since the last boom-and-bust cycle in 2010-2012, Kemet has undergone a dramatic transformation, in our view, through a series of restructuring moves and acquisitions. The company successfully consolidated high-cost manufacturing in Europe; integrated its tantalum-capacitor supply chain in order to be less reliant on outside raw-material suppliers; moved away from mobile-device and consumer end markets to focus on auto and industrial; and completed the acquisition of Tokin from parent NEC of Japan in early 2017.
Stifel Nicolaus analysts see a "5.5% sales decline in FY20 and 1.2% growth in FY21 (March). Growth in MLCCs should be offset by weakness in other product segments."
This dividend-paying stock with a 1% yield was trading on Friday up 8.9% at $20.11, the higher end of its 52-week range between $15.55 and $23.13. The stock has a market cap of $1.07 billion.
The five-analyst FactSet consensus rates the stock a buy with a $27.67 price target.
The shares are up 15% year to date, according to Yahoo Finance.