What is Value on AKP SP - if product lives up to full potential ??, page-63

There’s been a couple of posts saying that some of the valuations aren’t realistic.  It’s unfortunate those posters haven’t provided any details of their own estimations (yet?).   A few people have mentioned the attractive margins akp should be able to achieve early on due to supply constraints, hence my thoughts around why it’ll take a while before they’ll be in mobile devices.   The implications of the announcement regarding the improved lower frequency response perhaps hasn’t been well understood.  I’ve taken a different approach with this next valuation and looked at the potential after a year or so of production.  I believe the estimates used are conservative figures.

 

New technology is commonly a luxury/specialist item when it’s first released.  As such, akp speaker applications would include things like luxury cars, yachts, private jets, recording studios, movie theatres, home “audiophiles”, etc.  I’ve chosen luxury car audio systems to try and understand what that market might pay akp for similar performing speakers.   I say similar, but the reality is there’s no way speakers mounted in doors will sound better than speakers that direct sound precisely to the ears of a passenger and independently of other passengers in the vehicle as well.

 

A key assumption for this valuation is that the simplified speaker’s performance is able to achieve 65db @60+hz and the increase in db per additional chip utilised are the same as previously reported, and the db drops sharply below 60hz.  I estimate 12 akp chips would be required (it could be as low as 8 per akp’s presentations, and that was before the low frequency improvements) to match the volume required.   Given the anticipated accuracy of audio produced akp’s speakers should at least match the best that is out there.   Other assumptions include:

 

• Retailers and manufacturers both mark up speakers ~100% from their cost price (parts + build) which means the cost of a speaker for a manufacturer is roughly a quarter of the rrp.
• A subwoofer is still required.
• Costs for mounting/combining 12 akp chips plus subsequent car mounting & installation equal traditional car speaker mounting & installation cost.

 

A typical high end car audio 2 way component speaker retails at >$600 and >$700 for the amp which would drive 4+ speakers, so apportioning the amp cost across the 4 speakers = $775 rrp per speaker or ~$194 manufacturing cost minimum.  Therefore akp could sell the 12 chips for ~$16ea to be on par.  However the combination of intense competition amongst manufacturers, significantly reduced overheads (e.g. speaker R&D), improved speaker quality, functionality, aesthetics and weight could easily see audio manufacturers paying at least 25% more, i.e. $20ea.  Luxury car brands wouldn’t even think twice about paying the extra to have the latest wow factor tech.  Hi Elon.

 

If TJ’s fab can pump out 10000 wafers per month each with ~150 working chips (18m total) in year 1 and the total packaged cost to akp is say $7 per chip then very roughly estimated after tax profit to akp is (18m x ($20 –$7) – $10m overhead) x 0.7 tax = $157m.  FYI this would fit out ~375,000 vehicles.  Mercedes alone makes more than 2m vehicles a year.

 

A p/e ratio of 30 would put akp’s market cap at $4.7B.

 

Welcome any suggested revisions to the above estimates as I’d like to know if and where I’ve gone wrong.