STM - Renesas Electronics Positively Leveraged To Stronger Autos And New End-Market Opportunities

• Renesas will continue to benefit from the cyclical auto upswing, as orders grew strongly in the second half of 2020 and supplier negotiations are largely complete.
• I do see a risk to Renesas's strong share in powertrain MCUs given weaker positioning in powertrain electrification, but ADAS, auto connectivity, and infotainment all provide potential growth offsets.
• A robust package of assets spanning analog, connectivity, embedded processing, power, sensing, and wireless power should position Renesas as a major player in IoT, and particularly industrial IoT.
• Mid-single-digit revenue and FCF growth, not to mention near-term gross and operating margin, can support a 20% higher share price in the near term, with Dialog offering longer-term synergy opportunities.

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