Murata (6981): Winner in Handset Development for 4.5G and Beyond
In recent years, Apple has focused on differentiating its handsets on the grounds of software (e.g. Apple Pay, Apple Music) rather than hardware; to the extent that Samsung has stolen a considerable march on Apple in terms of specifications. The expectation is that Apple will now look to close that gap. This should play into the hands of Apple supply chain names in general, with Sony (6758), TDK (6762) and Murata all seen as beneficiaries. Murata is the most directly exposed.
Key Points
- Changes can be expected in key areas of handset innards, including screen, camera, haptics and front-end.
- The move to 4.5G and beyond is driving up demand for ultra-compact MLCCs, SAW filters, duplexers and multiplexers.
- Currency has hidden the benefits to Murata from these trends; these become obvious, particularly in piezo, if revenues are looked at in US$ terms.
- Currency reversal, which may have come too late to make a big difference to 3Q FY16 performance, should be noticeable in 4Q FY16.
- We target ¥220bil in OP in FY16, and ¥267bil, possibly up to ¥287bil, in FY17bil. Sell-side forecasts are still below these numbers.
- FY17 EV/OP is an undemanding 11x.
Murata Manufacturing is mainly engaged in the development, manufacture and sale of electronic components and modules in Japan, North America and certain other Asian and European countries. Co.'s products are sold mainly to electronics companies for use as components in telecommunication, computer, audio, video, automotive electronics and other electronic products. Co. is engaged in the development, manufacture and sale of electronic parts and related products, including components for capacitors and piezoelectric products, as well as modules products; the provision of welfare services, personnel services, education and training services, as well as the leasing and management of real estate.
Founded in 2009, Pelham Smithers Associates (PSA) provides market intelligence on Asian technology, focusing in particular on Japan. The industries covered by our team of specialists are: consumer electronics, telecomms, pharmaceuticals, internet, electronic parts and materials, automotive technology, retail and capital goods.
PSA produces both company and sector reports. The focus of PSA’s research is to identify winners and losers as new technologies impact the top and bottom lines of corporations. Critical to our research is the clear explanation of how these new technologies work and how they impact companies and industries.
The founding partners have worked closely together for twenty years and the team has more than doubled in size since 2012.
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