Morningstar | Taiyo Yuden: MLCC Order Slowdown Reflects Weaker Handsets Production, Demand From Autos Remain solid
Taiyo Yuden’s September quarter operating income was JPY 8.7 billion, which is above the guidance of JPY 7 billion and our forecast of JPY 8 billion. Owing to the robust demand of multi-layer ceramic capacitors, or MLCCs, price cut pressure was smaller than usual. We also assume that MLCC production was above our forecast because of the better utilization rate, both contributing to the margin expansion. However, we view that strong earnings numbers are already embedded to the share price, as favorable condition of MLCC is already demonstrated on competitors’ earnings. Taiyo Yuden has raised its operating income guidance for this fiscal year to JPY 30 billion, which is above our number of JPY 28 billion, as the company forecasts stronger demand from autos and industrials. Overall, we believe that reported numbers are fairly in line with our view that digitalization in various industries will drive growth of MLCC, which is the reason to retain our fair value estimate of JPY 3,000.Meanwhile, MLCC order for the September quarter was JPY 43 billion, below JPY 45.4 billion on the June quarter and below September quarter’s revenue of JPY 44 billion, which is casting a shadow on the future outlook. In fact, some news sources imply the slowdown on smartphone production in China, and, as a result, Taiwanese suppliers, suggests that price on small-sized MLCCs are recently declining. While we understand that the market may concern the downturn in the future, we believe that Taiyo Yuden’s earnings numbers will remain solid, as 1) more than half of Taiyo Yuden’s MLCCs are not competing with Taiwanese companies, and 2) all Japanese suppliers view that demand of larger-sized MLCC for autos and industrials are still quite strong and not able to be fulfilled by existing production capacities. Therefore, we will retain our view that the supply-demand balance of MLCC will remain tight in the longer run, driven by the digitalization in non-IT industries.
TAIYO YUDEN is a manufacturer mainly engaged in the electronic component business. Co. is involved in the manufacture and sale of electronic parts such as ceramic condensers, inductors, ferrite-applied components, ferrite cores, high frequency dielectric components, circuits modules, energy devices and composite ceramic applied components, among others. Co. is also engaged in the temporary staffing services, as well as consultation services for environmental measurement.
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