Valens Equity Weekly Insights and Inflections for March 15, 2022

March 15, 2022

  • Ichor Holdings, Ltd. (ICHR) is the dominant player in a critical memory chip subindustry, and it is improving profitability coming out of a difficult two-year period for the industry. Uniform Accounting highlights that the market is missing the company’s improving fundamentals, creating an opportunity for equity upside.
  • Ichor is the biggest and highest quality fluid and gas delivery system manufacturer, a key supplier to the growing memory chip market. Difficult supply dynamics in the memory market caused returns to dip in 2019-2020, but since the market has started normalizing, Ichor’s profitability is expected to bounce back towards historical levels. As the company continues to be a critical vendor to the memory market, it should be able to continue growing and improving its pricing power, which will boost returns higher than the market is currently pricing in.
  • Ichor’s management is aligned to focus on metrics that will incentivize revenue growth and margin expansion, suggesting management is well aligned to create value that the market is not pricing in.
  • Management confidence about its IMG acquisition and its cash flow generation heading into 2022 suggest the company is improving profitability and continues to be dominant in the industry.

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