Raising Murata Manufacturing's FVE to JPY 24,000; Price Hike of MLCC Will Be Higher than Anticipated

Equity Analyst, LightStream Research

Farha Sabri

Equity Analyst

Long-Short Analysis on Japan, Asia and the World

LightStream Research

LightStream conducts quantitatively rigorous and data-driven analysis with a focus on Japan and Asia.

We consistently cover the Tech, Consumer and Industrial sectors, and provide ECM and Events coverage more broadly.

We supplement traditional qualitative insights from company relationships with a robust quantitative foundation that examines as much historical data as is available.
We further refine the accuracy of our insights and calls through the use of alternative data to flesh out current trends, and through a valuation framework that emphasises non-superficial peer group selection and a proper attempt to understand the metrics and changes that have driven security valuations in the past.

Thematic (Sector/Industry)

<ul><li>Supply shortages for MLCCs (multi-layer ceramic capacitors) to continue into 2019 and beyond driven by unexpected increases in content per device in key markets, namely smartphones and vehicles.</li><li>MLCC content per device in smartphones has seen a 2x increase in recent times (2015-17) while that of electric cars has seen a 4x increase compared to ICE vehicles.</li><li>Manufacturers are expanding production capacity quite slowly and are introducing price hikes. Discontinuation of older MLCC models is also starting to take place.</li><li>Promising outlook in store for MLCC manufacturers as market does not seem to be slowing down anytime soon. Demand will continue to rise until IoT becomes widespread (consensus expects a CAGR of approximately 33% over 2017-20E). We believe that MLCC manufacturers will continue to see steady growth in top-line alongside healthy margins.</li></ul>

Supply shortages for MLCCs (multi-layer ceramic capacitors) to continue into 2019 and beyond driven by unexpected increases in content per device in key markets, namely smartphones and vehicles.MLCC content per device in smartphones has seen a 2x increase in recent times (2015-17) while that of electric cars has seen a 4x increase compared to ICE vehicles.Manufacturers are expanding production capacity quite slowly and are introducing price hikes. Discontinuation of older MLCC models is also starting to take place.Promising outlook in store for MLCC manufacturers as market does not seem to be slowing down anytime soon. Demand will continue to rise until IoT becomes widespread (consensus expects a CAGR of approximately 33% over 2017-20E). We believe that MLCC manufacturers will continue to see steady growth in top-line alongside healthy margins.

Bright Future Ahead for MLCC Market Amidst Increasing Electrification in Key Industries