Taiyo Yuden Earnings: Operating Income Guidance Is Conservative, Given MLCC Sales Growth

Narrow-moat Taiyo Yuden’s revenue growth guidance of 8.5% for fiscal 2024 (ending March 2025) is largely in line with our expectations, suggesting that demand for its mainstay multilayer ceramic capacitors, or MLCCs, will pick up following the completion of the inventory correction, driving Taiyo Yuden’s sales recovery. On the other hand, the operating income guidance of JPY 20 billion is much lower than we had expected. Based on the guidance, the company’s operating margin would recover from 2.8% in fiscal 2023 to 5.7% this year, but given that the company had double-digit margins from fiscal 2018-22, the margin expansion Taiyo Yuden expects for this year is not satisfactory. Given the sales recovery of profitable MLCCs, we believe the company is being quite conservative in expecting costs to rise with the production expansion.