MASTER OF SCIENCE IN FINANCE MASTER FINAL WORK PROJECT EQUITY RESEARCH: MICRON TECHNOLOGY MARIUS GRØNLI 15.OCTOBER.2019 1 MASTER OF SCIENCE IN FINANCE MASTER FINAL WORK PROJECT EQUITY RESEARCH: MICRON TECHNOLOGY MARIUS GRØNLI SUPERVISOR: PROFESSOR JOÃO CARVALHO DAS NEVES 2 Abstract This project is the final work as a part of the MSc. Finance degree at Lisbon School of Economics and Management (ISEG). Students can choose to write a master thesis or write an equity research of a chosen company. The project is structured after ISEG’s guidelines and the CFA institutes research report recommendations. I choose to analyze Micron Technology Inc. because of my interest in the technology sector, especially the semiconductor industry. The industry displays a lot of special traits like cyclicality and extreme capital requirements, which was both educational and demanding to analyze. 3 Acknowledgements To friends, family and girlfriend who have helped me through long hours of studying and especially trough this project which has taken a lot of my time and effort. To all the professors at ISEG who have guided me through the MSc. Degree at ISEG. Especially Professor João Carvalho das Neves for being my supervisor and giving me a lot of constructive feedback and help on this project. 4 Index Cover page ................................................................................................................................................2 Abstract ....................................................................................................................................................3 Acknowledgements .................................................................................................................................4 Index .........................................................................................................................................................5 Index: Figures ...........................................................................................................................................6 Index: Tables .............................................................................................................................................7 Index: Appendices ....................................................................................................................................8 Report Research Snapshot ...................................................................................................................................0 Business Description.................................................................................................................................1 Corporate Governance .............................................................................................................................4 Industry Overview ....................................................................................................................................5 Investment Summary ...............................................................................................................................8 Valuation ..................................................................................................................................................9 Financial Analysis ................................................................................................................................... 11 Investment risks .................................................................................................................................... 12 Micron as portfolio asset ....................................................................................................................... 16 -------------------------------------------------------------------------------------------------------------------------------------- Appendices ........................................................................................................................................... 19 Time Series Revenue Forecast: Support document .............................................................................. 40 Time Series COGS Forecast: Support document ................................................................................... 55 Abbreviation .......................................................................................................................................... 58 References ............................................................................................................................................. 59 5 Index: Figures Figure 1: Recommendation scale ........................................................................................................................................... Research snapshot Figure 2: Estimated price targets ........................................................................................................................................... Research snapshot Figure 3: Important markets ............................................................................................................................................................................... 1 Figure 4: Revenue by product ............................................................................................................................................................................ 1 Figure 5: Revenues by segment .......................................................................................................................................................................... 1 Figure 6: Revenue by employee .......................................................................................................................................................................... 2 Figure 7: CAPEX semiconductor industry ............................................................................................................................................................ 2 Figure 8: ROCE analysis ....................................................................................................................................................................................... 2 Figure 9: DRAM and NAND prices ....................................................................................................................................................................... 3 Figure 10: 3D Xpoint revenue forecast................................................................................................................................................................ 3 Figure 11: DRAM maturity yield .......................................................................................................................................................................... 3 Figure 12: NAND maturity yield .......................................................................................................................................................................... 3 Figure 13: Microns shareholders......................................................................................................................................................................... 4 Figure 14: Resource efficiency ........................................................................................................................................................................... 4 Figure 15: Corporate governance summary ........................................................................................................................................................ 4 Figure 16: Memory industry revenue ................................................................................................................................................................. 5 Figure 17: Segment shares and growth ............................................................................................................................................................... 5 Figure 18: Forecasted growth and revenue for phone and computer market .................................................................................................... 5 Figure 19: Emerging markets analysis ................................................................................................................................................................. 6 Figure 20: ASP projection of Silicon Wafers ........................................................................................................................................................ 6 Figure 21: Memory price dynamics ..................................................................................................................................................................... 6 Figure 22: Memory market shares ...................................................................................................................................................................... 7 Figure 23: Chinese market revenue .................................................................................................................................................................... 7 Figure 24: Investment in new fabs by countries ................................................................................................................................................ 7 Figure 25: Porters five forces .............................................................................................................................................................................