BRN (ASX) Long term valuation

Originally posted by FKE ↑

Good evening from Germany,
Long term valuation (7+ years) based on a purely theoretical subjectivelyinterpreted scenario with several assumptions:
1.) 5 applications/productswere chosen to be included in the consideration.
2.) Apotential Brainchip market share / pick rate of 20%.
3.) Thenumber of IPs/chips per application in the automotive industry is 10 pieces,for the rest 1 piece.
4.) Aprofit of $10 per IP/chip is expected.
5.) The PEfactor for company valuation is assumed to be 20.
6.) Calculationbased on 1.7B shares outstanding.
Calculation:
I haveattached a summary as a screenshot. Ihave put sources for the annual sales figures at the end of the text.

Automotivemarket:
About 66million cars are sold annually. We got here by Mercedes a first impressionwhich applications can be covered by AKIDA. I expect speech recognition, facerecognition and processing of information for autonomous driving. Certainly,there are significantly more applications in the automotive sector, but thisshould serve as a starting point. The estimated 10 IPs/chips per car are alsochosen relatively cautiously here. Accordingly, the potential is (66 M * 20% *10 units) a total of 132 million units per year.
Smartphones:
In myopinion a potential link to one major smartphone supplier would be a milestone.Approximately 1.5 billion cell phones are sold worldwide in a year. With anestimated market share of 20%, I calculate a potential of 300 million unitssold per year here, assuming one IP/chip per phone.
Refrigerators/ washing machines:
Dot joiningto LG + Peter's article (what to expect from the AI market in 2022) + thepublished Youtube videos by Brainchip make me include these two applications.Historical sales volumes of 236 million (fridges) and 170 million (washingmachines) lead to a potential annual volume of 47.2 million (fridges) and 34million units (washing machines) at 20% market share and one IP/chip perapplication.
SmartSpeaker:
The voicerecognition function seems to work, according to Mercedes. Furthermore, aconnection to Amazon/Apple seems to be an option in my opinion. With 166million units sold per year, a 20% market share for Brainchip results in apotential annual volume of 33.2 million units.
Totalunits / a
In total,we thus get an estimated potential of (132+300+47+34+33) approx. 546 millionunits per year.
The high-volumedemand quantities are met via IP, so I don't assume large material/productioncosts, etc. I have in mind 95% margin for an IP sale. The potential profit perunit is therefore assumed to be $10.
Profit/ a
Multipliedby the assumed 546 million units sold per year, we arrive at $5464 million in profit($5.464 billion).
MC
Multipliedby a PE factor of 20, we get a company valuation (MC) of just over $109 billion.
SP
This inturn corresponds to a share price of more than $64, based on 1.7B sharesoutstanding.

Additionalpotential applications/products/industries
In additionto this, there is an almost infinite number of other options that couldpotentially drive revenue growth for Brainchip. Here is just a small excerpt:
· Health- hand held devices
· TVs(215 million units 2021)
· Desktop/ Notebook (341 million units 2021)
· Headphones
· Smartglasses
· Cybersecurity
· Maintenance(Construction, Cars, etc.)
· SmartCity
· Powerconsumption optimization for server
· Drones
· Military
· NASA
· Smartrobotic
· Severalindustry applications
· Thingswe have absolutely no idea of that they will ever exist
· etc.
Sourcesof sales figures:
•Global car sales 2010-2021 | Statista
•Smartphone sales worldwide | Statista
•Global: refrigerator sales 2012-2025 | Statista
Alexa, tell me about the smartspeaker market in 2021 | S&P Global Market Intelligence (spglobal.com)
• Washing machines & dryers unitsales worldwide 2013-2025 | Statista
•Global TV shipments 2015-2021 | Statista
Canalys Newsroom - GlobalPC shipments pass 340 million in 2021 and 2022 is setto be even stronger

In the caseof Statista sources, data may not be visible without payment. A Google searchwill confirm the figures given relatively quickly.
I am ananonymous poster. DYOR. No financial advice.
FKE

Expand

My back of the envelope long term valuation (>7 <10years), based on figures I plucked out of my posterior, comes in around your figures, conservatively based on the valuations of other "ASX" listed companies, that have hugely inferior profit margins, due to our IP business model.

But, I don't think we would be getting as high as $10 per IP use.
It would be less than the chip profit (due to volumes), but without the company needing to outlay the capital to make the chips.

Just my opinions.

Does anyone have an idea, what ARM's IP pricing is per unit?

I know Rob Telson would know, but I'm pretty sure he'd be tip lipped about it..

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(20min delay)
Last 20.0¢		Change 0.000(0.00%)		Mkt cap ! $371.1M

Open	High	Low	Value	Volume
19.5¢	20.5¢	19.5¢	$656.1K	3.281M

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