2. Table of Contents
I. Investment Thesis
II. Company Overview
III. Industry Overview
IV. Valuation
V. Appendix
3. Investment Thesis: MKS Instruments (NASDAQ/MKSI)
MKS Instruments, Inc. provides instruments, systems, subsystems, and process
control solutions that measure, monitor, deliver, analyze, power, and control critical
parameters of manufacturing processes worldwide.
Recommendation: Buy Current Price: $156.87 Target Price: $188.77
Investment Thesis
● MKS Instruments is focused on
growth in their industry by
performing successful acquisitions
to reach new markets
● Promising end market opportunities
in industrial semiconductors
● Have been experiencing stable
demand that is expected to increase
Merits
● Niche market leader
● Diversified product line
● Promising acquisition of Atotech
Risks
● Future results are subject to fluctuations
● Global business regulations
● Top 10 customers make up 44% of revenue
4. Company Overview
● Founded in 1961
● Initial Public Offering (IPO) in 1999
● Market cap of $8.5B
Headquarters in Andover, MA
● 5,800 employees
● 9 domestic locations
● 5 international locations
5. Business Model
● MKSI is a global provider of instruments, systems, subsystems and process
control solutions that measure, monitor, deliver, analyze, power and control
critical parameters of advanced manufacturing processes to improve process
performance and productivity. Products are used for tech, health sciences,
industrials, and research and defense.
Top 5 Customers
Customers % revenue
Lam Research Corp 12.40%
Applied Metals 10.90%
Tokyo Electron Ltd 5.89%
ASML Holding NV 5.69%
Samsung 2.91%
Top 5 Suppliers
Suppliers Rev. Involvement
Gooch & Housego PLC 2.41%
nLight Inc 0.72%
Lumentum Holdings Inc 0.11%
Brooks Automation Inc 0.09%
Berkshire Hathaway <0.01%
6. Revenue Breakdown
Segment Revenue (millions) Revenue %
Vacuum and Analysis 1405.9 60.34%
Light and Motion 689.6 29.60%
Equipment and Solutions 234.5 10.06%
7. Industry Outlook
● Demand for Semiconductor Manufacturing is
expected to expand over the five years
● Industry exports are expected to increase at an
annualized rate of 4.4% to $22.3 billion over the
next five years.
Average Chip Revenue ($B)
14. SWOT Analysis
● Strengths
○ High and increasing barriers to entry
○ Well diversified
○ Mature, low debt, stable EBIT
● Opportunities
○ High performance drivers
○ Revenue forecasted to increase at an
annualized rate of $2.4 billion over the
next five years
● Threats
○ Industry and customer concentration
○ Integration of acquired businesses
○ High revenue concentration
● Weaknesses
○ Low profit vs sector average (rank 60th)
○ Subject to unforeseen risks in the global
supply chain and consumer demand
○ Revenue is limited by supply challenges
15. Comp Sheet
Porter’s Five Forces
● Potential Entrants - Low
○ High barriers to entry decreases the risk along with high startup costs
○ Barriers to entry are set to increase
● Suppliers - Medium
○ MKSI is largest company focused on gas for semiconductors
● Buyers - Low
○ High startup costs means it is unlikely that buyers will produce on site
○ MSKI does not face many direct competitors
● Threat of Substitutes - Very low
○ Industry products have high complexity
● Competitive Rivalry - Low
○ Many players in this sector do business together and benefit each other
16. ● Broad end market possibilities. E.g. Increase use of semiconductors in industrial applications.
This increase was seen in the Q3 earnings call.
● Atotech acquisition lets them expand customer market by reaching the growing demand
● Atotech has 65% of revenue from electronics, they will strengthen the electronics supply chain
● MKSI, along with competitors, is experiencing stable demand
● Semiconductor downstream market growth
Revenue Drivers
17. Comp Sheet
Growth Expectations
● Advanced electronics manufacturing segment double digit CAGR growth 2020-2025
● 4.2% annualized revenue growth in the Semiconductor Machinery Manufacturing Industry
expectations 2021-2026
● Downstream market growth is expected to increase MKSI industry revenue
● Analyst projections and target price are consistent with our findings from relative valuation
27. Investment Thesis: MKS Instruments (NASDAQ/MKSI)
MKS Instruments, Inc. provides instruments, systems, subsystems, and process
control solutions that measure, monitor, deliver, analyze, power, and control critical
parameters of manufacturing processes worldwide.
Recommendation: Buy Current Price: $156.87 Target Price: $188.77
Investment Thesis
● MKS Instruments is focused on
growth in their industry by
performing successful acquisitions
to reach new markets
● Promising end market opportunities
in industrial semiconductors
● Have been experiencing stable
demand that is expected to increase
Merits
● Niche market leader
● Diversified product line
● Promising acquisition of Atotech
Risks
● Future results are subject to fluctuations
● Global business regulations
● Top 10 customers make up 44% of revenue
