Morgan Stanley said that MLCC has bottomed out and is showing a slow and steady recovery, and is optimistic about Yageo (2327).

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[Financial Channel/Comprehensive Report] Morgan Stanley (Morgan Stanley, Morgan Stanley) said that the latest survey shows that with the help of supply adjustments, inventory continues to improve, while meaningful demand recovery is still yet to come, MLCC (multilayer ceramic capacitors) ) The ongoing cyclical recovery is showing a slow and steady climb. We are optimistic about Yageo (2327), a major passive component manufacturer in Taiwan.

The Morgan Stanley report pointed out that customer inventories have normalized, distributor inventories have fallen sharply, and most producers may reach healthier levels in Q2.

Demand was stable in March, but not as optimistic as expected after the Lunar New Year, with spot prices down an average of 3-5% month-on-month, but up 5-12% from their lows in Q2 last year.

Visibility remains limited in the second half of the year, but many areas of consumer technology are seeing higher annual growth, including PCs (personal computers), smartphones, consumer electronics, and distributors are starting to see continued improvement in smartphones and home appliances .

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Morgan Stanley said that the bottom since Q4 last year is forming, and is now heading for an early cycle turnaround.

The supply side is reorganized, and the contract price has stabilized for two consecutive quarters, and Q2 is expected to be flat.

Related stocks underperformed the broad Asian technology sector last month due to profit-taking, and Morgan Stanley believes that the second half of the year is supported by a stronger overall environment led by China's consumption, which provides a strong boost.

Driven by continuous production cuts to maintain a balance between supply and demand, Q2 contract prices may remain flat; due to the tepid market demand in the recent off-season, spot prices fell slightly, but dealers expect that there will be limited downside space thereafter; the inventory level of downstream customers has returned to normal , while most suppliers expect that the inventory adjustment process will end in Q2.

The capacity utilization rate of Q1 is flat. Morgan Stanley estimates that the industry utilization rate of IT MLCC is 40-60%. Most suppliers expect Q2 to improve. Samsung’s S23 is expected to promote the strength of its Samsung Electro-Mechanics (SEMCO); The demand side is still flat, but compared with last year’s Q4, Q1’s demand for smartphones and home appliances has improved in a single quarter, while automotive MLCC orders and server demand have deteriorated.

In terms of stock selection, Morgan Stanley believes that South Korea and Taiwan are better than Japan. Although the overall growth data of the industry is still limited, the data clearly shows that Q4 has bottomed out.

Inventory adjustments and price stabilization are further signs of an improving cycle.

Morgan Stanley recommends continuing to invest in MLCC, and is optimistic about South Korea's Samsung Electro-Mechanics and Taiwan's Yageo (2327).

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