MLCC Suppliers’ Earnings: Mixed Impressions on Guidance but We Remain Confident of Recovery

Although Murata Manufacturing and TDK, two major suppliers of multilayer ceramic capacitors, gave mixed guidance for the new fiscal year, we maintain our view that strong demand for auto MLCCs will continue, while orders for smartphones will gradually recover in the coming quarters. Although the timing of a full recovery in demand for smartphones and PCs remains difficult to predict, we believe that the inventory digestion for smartphones has made significant progress in recent quarters, and therefore MLCC orders will gradually approach previous levels. We will revise our earnings forecasts and fair value estimates after discussions with both companies in mid-May, but continue to believe that shares of both are undervalued, as MLCCs' midterm growth driven by auto demand is not fully priced in.