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

Although Murata Manufacturing and TDK 6762, 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.

Murata’s full-year operating income guidance for fiscal 2023 (ending March 2024) is JPY 220 billion, down 30% from the previous year and below the PitchBook consensus of JPY 299 billion. While the numbers appear disappointing, we believe the assumptions regarding capacity utilization, price erosion, and foreign exchange are conservative. In addition to them, the new guidance does not seem to fully account for the potential share gains in RF modules. Meanwhile, Murata has not changed its plan to increase MLCC production capacity by 10% for this fiscal year, which is underpinned by the confidence in long-term demand from the auto industry.

TDK’s full-year operating income guidance for fiscal 2023 is JPY 190 billion, up from JPY 169 billion in the previous fiscal year. The guidance for the new fiscal year is only slightly higher than the previous year’s number, excluding the impact of one-time charges in the previous year (JPY 34.7 billion) and currency movements. However, TDK’s investment plans to double tunnel magnetoresistance sensor capacity over the next two years and further increase auto MLCC capacity after the current expansion plan ends in fiscal 2024 are encouraging.