Morningstar

Morningstar, Inc.

Equity Bottom-Up

TDK’s new operating income guidance of JPY 120 billion is 11% above the previous year’s number and in line with our expectation. We forecast that profits in the first half will be weaker than usual, as ongoing inventory adjustment, owing to the economic slowdown, will drag down its profitability. However, we believe that 1) robust demand of passive components for auto; 2) increasing market share for the polymer rechargeable battery; and 3) new adoption of its sensors for autos and handsets, will…

TDK’s December quarter operating income of JPY 32.7 billion is lower than our forecast of JPY 38.7 billion, but we think weak numbers are already embedded to the share price, as economic indicators and peers’ results have already been suggesting deceleration in China. From this point of view, we consider that TDK’s numbers were rather encouraging, as operating margin of the passive components segment improved to 13.8% from 12.4% of the previous year, despite the weakness of smartphone shipment…

After the earnings announcement and the meeting with TDK, we are trimming our fair value estimate to JPY 12,000 from JPY 12,500 despite the robust September quarter results. While we are confident in the growth of multilayer ceramic capacitors, or MLCCs, we lowered our revenue growth assumption for the sensor application products business, believing that the company’s original outlook is too optimistic. However, we retain our view that TDK will eventually benefit from increasing sensor demand…

TDK’s operating income for the June quarter of JPY 25.4 billion was above our forecast of JPY 22 billion. While robust auto demand continues to drive the growth of multilayer ceramic capacitors, or MLCCs, as expected, revenue growth on polymer rechargeable batteries was above our forecast. Although recovery in Chinese smartphone production contributed to the growth, we believe that orders from Chinese manufacturers are unsustainable because of the weaker end demand, and so June quarter numbers…

TDK’s new operating income guidance for fiscal 2019 (financial year ending March 2019) is JPY 100 billion, expecting 17% increase from the previous year. While the number is below our forecast of JPY 115 billion, we consider that the difference is owing to the conservative assumptions made by the management, including the foreign exchange rate. Meanwhile, we believe that TDK’s plan to spend JPY 210 billion for this fiscal year, which is 16% of the revenue and the largest number throughout its…

Japan

TDK CORPORATION manufactures electronics components such as magnetic tapes and ferrite cores.  The Company also sells power supplies, inductors, transformers, ceramic capacitors, magnets, LAN (Local Area Network) components, sensors, and semiconductors.  TDK markets its products worldwide.