Company Reports

Murata Manufacturing's June-quarter sales rose 21% year over year and operating income surged 60%, driven by a weaker yen and robust passive component demand for artificial intelligence data centers and automobiles. It raised full-year sales and operating income guidance by 8% and 13%, respectively.

Murata Manufacturing is a top supplier of passive components, such as the multilayer ceramic capacitor, or MLCC, (40% global share), and surface acoustic wave, or SAW, filters (40%-45% global share). While we acknowledge that shipments of digital devices are slowing down, we believe progress in telecommunications technology will be the driver to increase content per device.

After follow-up meetings held after the March-quarter results, we revisited our view on artificial intelligence data center demand and updated our earnings forecasts and fair value estimates for Murata Manufacturing, Samsung Electro-Mechanics, Yageo, Taiyo Yuden, and TDK.

Murata Manufacturing is a top supplier of passive components, such as the multilayer ceramic capacitor, or MLCC, (40% global share), and surface acoustic wave, or SAW, filters (40%-45% global share). While we acknowledge that shipments of digital devices are slowing down, we believe progress in telecommunications technology will be the driver to increase content per device.

Murata Manufacturing guided for a 34.8% increase in operating income for fiscal 2026 (ending March 2027) and, during the earnings briefing, explained that the company expects to benefit from massive investment in data centers driven by the widespread adoption of generative artificial intelligence.

Murata Manufacturing is a top supplier of passive components, such as the multilayer ceramic capacitor, or MLCC (40% global share), and surface acoustic wave, or SAW, filters (40%-45% global share). While we acknowledge that shipments of digital devices are slowing down, we believe progress in telecommunications technology will be the driver to increase content per device.

Following meetings with companies regarding December-quarter results, we revised our earnings forecasts and fair value estimates for passive component suppliers Murata Manufacturing, Samsung Electro-Mechanics, or Semco, TDK, and Taiyo Yuden.

Murata Manufacturing is a top supplier of passive components, such as the multilayer ceramic capacitor, or MLCC (40% global share), and surface acoustic wave, or SAW, filters (40%-45% global share). While we acknowledge that shipments of digital devices are slowing down, we believe progress in telecommunications technology will be the driver to increase content per device.

Murata Manufacturing's sales increased 4.3% in the December quarter, but operating income was 50% down year over year due to impairment charges for the SAW filters business. The company lowered its operating income guidance for fiscal 2025 (ending March 2026) to JPY 270 billion from JPY 280 billion.

Major passive component suppliers, Murata Manufacturing, Samsung Electro-Mechanics, Yageo, TDK, and Kyocera all reported solid revenue growth in the September quarter, driven by computing demand. All of the Japanese suppliers raised their full-year guidance for fiscal 2025 (ending March 2026).

Murata Manufacturing is a top supplier of passive components, such as the multilayer ceramic capacitor, or MLCC (40% global share), and surface acoustic wave, or SAW, filters (40%-45% global share). While we acknowledge that shipments of digital devices are slowing down, we believe progress in telecommunications technology will be the driver to increase content per device.

For the June quarter, Murata Manufacturing's sales and operating income decreased by 1.3% and 7.2%, respectively, due to the appreciation of the yen. However, excluding the currency impact, they grew 4.7% and 12.0%, respectively. The book/bill ratio improved to 1.04 from 1.01 in the March quarter.

While its peers guided flat or increasing operating income for fiscal 2025 (ending in March 2026), Murata Manufacturing guides a 21.3% decrease in operating income for the same period. This is due to the appreciation of the Japanese yen and weak sales in the devices and modules segment.

Murata Manufacturing is a top supplier of passive components, such as the multilayer ceramic capacitor, or MLCC (40% global share), and surface acoustic wave, or SAW, filters (40%-45% global share). While we acknowledge that shipments of digital devices are slowing down, we believe progress in telecommunications technology will be the driver to increase content per device.

While Murata Manufacturing's December-quarter sales increased 2.0% year on year, operating income decreased 0.3% due to lower demand and one-time charges for the rechargeable battery business. The company kept its operating income guidance of JPY 300 billion for fiscal 2024 (ending March 2025).

Murata Manufacturing is a top supplier of passive components, such as the multilayer ceramic capacitor, or MLCC (40% global share), and surface acoustic wave, or SAW, filters (40%-45% global share). While we acknowledge that shipments of digital devices are slowing down, we believe progress in telecommunications technology will be the driver to increase content per device.

Murata Manufacturing's September-quarter results were largely in line with our expectations. Operating income of JPY 91.8 billion was slightly below our expectation of JPY 95 billion, but this was due to higher restructuring costs in the rechargeable battery business.

Murata Manufacturing is a top supplier of passive components, such as the multilayer ceramic capacitor, or MLCC (40% global share), and surface acoustic wave, or SAW, filters (40%-45% global share). While we acknowledge that shipments of digital devices are slowing down, we believe progress in telecommunications technology will be the driver to increase content per device.

Over the past two days, four passive component suppliers reported their June quarter results. Compared with our expectations, Murata Manufacturing’s numbers were slightly lower, Samsung Electro-Mechanics’ were mainly in line, and TDK’s and Yageo’s were higher. Such divergence in earnings performance is mainly due to differences in product portfolios, but demand by end-product generally showed a similar trend. While industrial products remained sluggish and automobiles and smartphones are stagnating, demand for applications related to high-performance computing, such as servers and PCs, seem to be improving. While we maintain our earnings forecasts and fair value estimate of JPY 4,000 for Murata Manufacturing, we plan to review our earnings forecasts for Semco, TDK, and Yageo after meeting with each company in early August. Overall, we expect that margin expansion for passive component suppliers will continue to improve in the coming quarters, driven by the better capacity utilization and an improved product mix. However, the strengthening of the Japanese yen could be a risk factor for Japanese suppliers.

We upgrade Murata Manufacturing’s moat rating to wide from narrow, based on the intangible assets and cost advantage of its multilayer ceramic capacitor, or MLCC, business. As a result, we raise our fair value estimate for Murata to JPY 4,000 per share from JPY 3,600, and believe its shares are undervalued.