Taiyo Yuden Earnings: Disappointing Results Do Not Change Our Confidence in MLCC Growth

Narrow-moat Taiyo Yuden’s operating income for the June quarter was JPY 2.6 billion, lower than our forecast of JPY 3.5 billion. While demand for PCs and information infrastructure such as servers recovered as expected, the company’s profitability was lower than expected for the following two reasons: 1) due to the stagnant orders from Chinese smartphone manufacturers, the utilization rate of multilayer ceramic capacitors was not as high as expected, and sales of telecom devices declined year on year; and 2) fixed costs were higher than we had expected as a result of aggressive capital investment in MLCCs over the past two years to meet long-term demand growth. It is disappointing that the 3.2% operating margin in the June quarter is significantly lower than the 16.1% two years ago, implying that the margin recovery is slower than expected.