Morningstar

Morningstar, Inc.

Equity Bottom-Up

After reviewing our forecasts and meeting the company, we retain Taiyo Yuden’s fair value estimate of JPY 3,000. Owing to concerns for the trade war and the uncertainty about smartphone demand, Taiyo Yuden’s share price has declined more than 25% since its recent peak in April. However, we view Taiyo Yuden’s business portfolio is better diversified than in the past, and thus its revenue from multilayer ceramic capacitors, or MLCCs, will be supported by the robust demand from autos and telecom…

Taiyo Yuden’s December-quarter operating income was JPY 11.8 billion, above our forecast of JPY 9 billion. While we had been concerned about weak smartphone demand, Taiyo Yuden compensated for declining sales from handsets with robust demand from autos and cellular base stations. We believe the price hike for multilayer ceramic capacitors, or MLCCs, was the main driver improving the operating margin from 11.8% in the September quarter to 15.9% in the December quarter. MLCC suppliers--including…

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…

Taiyo Yuden's operating income for the June quarter is JPY 6 billion, which is 75% above the previous year's number, but in line with our forecast of JPY 5.8 billion. Driven by the robust demand from autos and industrial equipment, revenue for capacitors increased 22% from the previous year, which is the major reason of the margin expansion to 10.0% from 6.3%. The company revised its operating income guidance for fiscal 2019 (financial year ending March 2019) from JPY 21 billion to JPY 24.5…

We will raise Taiyo Yuden’s fair value estimate to JPY 2,400 from JPY 2,100, as we have revised our revenue forecast. We believe that demand for multi-layer ceramic capacitors, or MLCC, will be much stronger than our original numbers, underpinned by the auto digitalization and 5G/Internet of Things base station investments. The top two suppliers of auto MLCC are TDK and Murata Manufacturing, but as these companies are not able to fulfill demand especially from the auto industry, Taiyo Yuden will…

Japan

Taiyo Yuden Co., Ltd. manufactures and markets electronic components such as, ceramic capacitors, inductors, hybrid integrated circuits (IC), and ferrite. The Company's products include power supplies, inverters, optical disks, filters, coils, and thermistors.