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Can TTM Technologies Turn Into a High Profitable Growth Company?


  • Growing US defense spending boosts core segment revenue
  • Strategic divestments to drive future profitability
  • China poised to win 5G race, providing a growth catalyst

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TTM Technologies’ revenue breakdown 2020

Price turned bullish, signal stays neutral

  • Recently, the 50 DMA has crossed the 200DMA, which is a good sign
    • If the 50DMA were to continue that upward trend, it could turn into a bullish signal
  • Throughout the past year, Volume RSI has mainly stayed below the 50%-line
    • So, volume is not a support yet for a bullish rally

Growing US defense spending boosts core segment revenue

  • TTM’s recent focus on the fast-growing aerospace & defense segment has paid off
    • In 2020, the segment contributed 37% of total revenue, compared to 16% in 2014
  • The company became an establish sub-contractor of the US gov’t
    • Therefore, I expect improved earnings stability

Strategic divestments to focus on growth segments

  • Defense spending in the US enjoys bipartisan support
    • Therefore, spending is likely to growth between 2-4%
  • Another characteristic of the defense industry is an increased consolidation of suppliers
    • With strategic M&As, TTM could get further exposure to the resilient industry, driving stable revenue growth

Strategic divestments to drive future profitability

  • TTM continues to reduce exposure to sensitive consumer and commodity segments to build a more resilient business
    • In 2020, it divested its mobility business, which was highly capital-intensive
    • Also, it shut down two of its low-margin electro mechanical solution (E-MS) plants
  • As a result, 2020 revenue declined by 21% compared to its peak in 2017
    • However, net fixed assets shrunk by 36%, providing capital for profitable investments

Rising profitability has more to give

  • The success of the divestments should be already reflected in 21E
    • The gross margin is likely to reach 16%, which is 1bps higher YoY
  • Over time, the company still has the ability to further expand the margin
    • With a maximum of 16.5% in my forecast, I have been rather on the conservative side, leaving room for positive surprises

China poised to win 5G race, providing a growth catalyst

  • As of 2021, China has built more than 1.1m base stations for 5G, equaling around 70% of global stations
  • Continued aggressive expansion of 5G network could already lead to nationwide coverage by 2025
    • Therefore, we expect strong demand for TTM’s printed circuit boards (PCB)
    • The management expects 5-8% growth rate for this end market, which seems realistic

Networking end market could become 2nd largest segment

  • TTM has 5 factories in China specialized in the production of PCBs
  • Besides aerospace & defense, its products applied in the network industry could provide a growth catalyst for the mid-term future
    • I think it’s a great opportunity for TTM to beat current market expectations

FVMR Scorecard – TTM Technologies

  • A stock’s attractiveness relative to stocks in that country or region
  • Attractiveness is based on four elements
    • Fundamentals, Valuation, Momentum, and Risk (FVMR)
  • Scale from 1 (Best) to 10 (Worst)

Analysts see a right time to buy

  • All 6 analysts have a BUY recommendation with an average upside of 29%
  • Consensus expects a robust revenue growth over the next few years
    • Also, they believe that the company can expand its margin significantly

Get financial statements and assumptions in the full report

P&L – TTM Technologies

  • The management plan to focus on more profitable and less cyclical end markets should pay off
    • 2020 net profit is distorted by gains from divestiture
    • I expect consistent growth in profits 21E onward

Balance sheet – TTM Technologies

  • Net fixed assets decreased as a result of its divestments
    • This leads to a solid cash position, providing funds for expansion of its core segments
  • TTM has a healthy balance sheet
    • Its net-debt to equity ratio stood at 0.3x in 2020 and should decrease further over time

Ratios – TTM Technologies

  • TTM’s focus on higher segments translates into improved efficiency
  • Gross margin in 21E and 22E could pass 16% and I expect the company to maintain it over time

Long-term share price performance potential

Free cash flow – TTM Technologies

  • FCFF likely to grow consistently over time in line with higher profits

Value estimate – TTM Technologies

  • Despite the management’s effort to become more profitable, I think it still has a long way to go
  • However, my margin forecast is rather conservative
    • Despite the management’s effort to become more profitable, I think it still has a long way to go
    • Still, any positive surprise would add additional upside

World Class Benchmarking Scorecard – TTM Technologies

  • Identifies a company’s competitive position relative to global peers
  • Combined, composite rank of profitability and growth, called “Profitable Growth”
  • Scale from 1 (Best) to 10 (Worst)

Key risk is high dependency on demand side

  • Adverse regulatory changes, especially in China, could hamper the business
  • Failure to meet quality standards and reliance on suppliers
  • Dependency on top 5 customers which make up 1/3 of total sales


  • Management strategy could lead to higher profitable growth
  • Healthy balance sheet can support expansion of core segments
  • Valuation is attractive; might be a cheap opportunity to buy

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