ACM Research Inc. (ACMR) is a name that screened as a top small cap into 2021 and shares are +32% YTD and showing some recent strength while 4000 October $90 puts were sold to open on 9/10. ACMR is focused in the global semiconductor manufacturing tools with most of its revenues in Asia.

ACMR is a semiconductor equipment company that advanced chipmakers use its wet-cleaning and other front-end processing tools in numerous steps to improve product yield, even at increasingly advanced process nodes. Its tools are used in fabricating foundry, logic and memory chips, including dynamic random-access memory, or DRAM, and 3D NAND-flash memory chips. ACMR also develops, manufactures and sells a range of advanced packaging tools to wafer assembly and packaging customers.

ACMR top customers include Semiconductor Manufacturing International Corporation, Shanghai Huali Microelectronics Corporation, The Huahong Group, SK Hynix Inc., Yangtze Memory Technologies Co., Ltd, and ChangXin Memory Technologies.

ACMR estimates its addressable market for its products at $5B of the global wafer equipment market, $2.5B in wafer cleaning equipment, $1.7B in furnace equipment, $500M in electro-chemical plating, and $300M in stress-free polishing. Based on Gartner’s estimates, the total available global market for these equipment segments increased by 15% from $5.6 billion in 2019 to $6.4 billion in 2020 and is expected to increase by 6% to $6.8 billion in 2021. ACMR continues to build out its product portfolio and has been issued mor than 350 patents. Its next generation TECO and Tahoe products are expanding its addressable market in wafer clean.

ACMR has a market cap of $2B and trades 53X Earnings and 10.7X Sales with revenues consistently growing (45.7%, 44.1% and 104.5% last three years) while the outlook sees revenue growth of 49% this year and 38% next year along with strong profitability and a very strong balance sheet. ACMR noted on its last call that most of its customers are still in the early to middle stages of multiyear capacity expansions and sees significant opportunity ahead. ACMR is also expanding and will begin production in the second building of its Chuansha factory in the third quarter of this year. ACMR has been making significant R&D investments with a goal of doubling its addressable market to $10B.

ACMR is an impressive growth stock positioned for the continued expansion/growth across the semiconductor industry. ACMR also recently received China CSRC approval for the planned China STAR Market IPO of its Shanghai subsidiary which is likely in 2H21. ACMR penetration in the China market is currently around 6% with a lot of room to grow. It trades at a premium multiple though at a $2B market cap with an expanding TAM to $10B it appears to be undervalued long-term considering its impressive growth consistency.