Semcon’s new restructuring strategy may increase profit margins. The intention is to put further emphasis on digital services such as AI, autonomy and UX. This will make Semcon more competitive as well as potentially increasing their EBIT margin to an estimated 8.1% by 2023.
Industry trends in Automotive and Industrial suggests increased future demand in tech. These trends include: (i) Autonomous vehicles, (ii) electrification, and (iii) human-machine-interface. An increased focus in these areas, combined with Semcon’s existing expertise, will place them in a good position to take advantage of future opportunities. This will be a valuable growth driver going forward.
The general constraints of a consultancy-based business model may limit Semcon’s longer term growth. These constraints include labor intensity, high competition, time-bounded products and difficulty to scale. This may place a squeeze on profit margins. Additionally, in the future it is likely that more resources must be allocated to R&D following increased competition. This may also impact profit margins.
Analysts: Sean Taylor & Fanny Leffler