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RNECF - Renesas Electronics: Low ROIC Rising Capex Put Us On The Sidelines
Renesas Electronics Corp
Renesas Electronics continues to diversify into higher return markets via M&A, demonstrated by the announcement to buy Dialog Semiconductor.
The market outlook is positive with both automotive and industrial/infrastructure/IoT domains recovering firmly, and the pandemic accelerating demand for semiconductors.
Our concerns stem from low ROIC highlighting potential issues ahead, and increasing capex needs eroding free cash flow. We are neutral on the shares.