IZMO Ltd is getting a lot of traction recently, so I decided to share some thoughts.
The company operates across 4 divisions - 3 of which are basically SaaS while the 4th one is Izmo Microsystems
--> izmostock, izmoauto and frogdata are their legacy SaaS divisions selling stock images of cars, digital marketing for automotive clients and data analytics for automotive industry respectively.
While stock imagery and digital media divisions have historically anchored the business, they are facing long-term headwinds and are practically sunset businesses now in the generative AI era.
--> Izmo Microsystems represents the company’s high-margin, scalable, deep tech semiconductor ATMP division which is the primary catalyst for investor optimism
So far, they have demonstrated capabilities in advanced semiconductor packaging and silicon photonics (although the latter is not good enough for data center use case as of now but good for defence/aerospace purposes from where they are getting almost all their orders for now).
The bull case rests on the assumptions that eventually they will be able to tap into the massive $50-100 Billion global TAM but for now this seems like an overblown narrative to pump the stock price (promoters here have a history of overpromising and underdelivering in past as well).
Also, the semiconductor fabs in US/Taiwan/Korea are fairly advanced themselves and there is no logical reason for them to outsource such critical tech to Indian foundries in future. So, stating $100 Billion TAM seems to be an exaggerated guidance for a company whose yearly revenue today is barely ~$30 million with no huge orderbook to back the claims.
--> The reasonable bull case which I can see is them getting orders in coming years from ISRO and Indian defence-aerospace companies for specific components related to optics/lasers/semiconductors etc.
Izmomicro getting hyperscaler data center orders for critical bottleneck components seems very far-fetched as of now.
In future, there is a small possibility that data centres being built in India are told to indigenize the supply chain to some extent which could be a big future tailwind.
--> Regardless, the stock price currently is driven by future narrative rather than financials and the cheap 30x PE valuation also allows people to take some risk here.
I have a small tracking size of this company in my portfolio. Let's see how far they take it based on the narrative alone.
Ofc any new order updates would act as sharp triggers for the stock price going ahead.