報告_MS_MLCC產業_20260915

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原始內容

M September 15, 2026 09:24 PM GMT

Global Technology

MLCC: Continued Demand Growth for High-Value-added Products for AI & Data Centers

Remain OW on Murata, SEMCO & Yageo, which we see as MLCC demand growth beneficiaries, and upgrade Taiyo Yuden to EW.

Key Takeaways

• We forecast global MLCC shipment value to expand at a CAGR of 20.3%, driven by growing demand for AI servers/DCs.
• MLCCs are a key business, accounting for 50% of sales at Murata Mfg, 46% at SEMCO, 19% at Yageo, and 70% at Taiyo Yuden in 2025.
• We expect Murata, the top player by global market share, and No. 2 SEMCO to benefit particularly strongly from expanding demand for AI server/DC MLCCs.

MLCC is early cycle in AI server & rack penetration:

Revenue growth is inflecting, driven by a structural change from AI-related MLCC content. This shift to higher-margin AI products will support sustained earnings growth worth more than cyclical earnings growth - and thus, higher valuations. In short, MLCC is perhaps the new investment highly levered to data center spending among the "AI picks & shovels".

Demand in high-value-added MLCCs for AI/DC to

keep growing from 2027: We forecast CAGR in global MLCC shipment value at 20.3% in 2025-31 ($14.67bn to $44.45bn) based on our outlook for continued growth in sales of small, high-capacity, high-value-added MLCCs for AI servers/DCs.

Murata & SEMCO the biggest beneficiaries: MLCCs are a key business, with 50% of sales at Murata, 46% SEMCO, 19% Yageo, and 70% Taiyo Yuden in 2025. We expect growing demand for AI server/DC MLCCs to be particularly positive for Murata (top player at 41% global MLCC market share in 2025) and SEMCO (#2 at 23%). We view the sell-off in these stocks from their peaks as a re-entry opportunity.

Remain OW on Murata as Top Pick in Japan electronic components; raise Taiyo Yuden to EW: We raise Murata forecasts as in Exhibit 25 . However, we lower our DCF-based PT from ¥12,500 to ¥11,000, mainly reflecting an increase in our DCF model risk-free rate (2.6% to 3.0%). We also revise Taiyo Yuden estimates ( Exhibit 33 ), but expect it to take longer than Murata & SEMCO to benefit from AI server/ DC MLCC demand growth. We lower our DCF-based PT from ¥12,500 to ¥10,500

Morgan Stanley MUFG Securities Co., Ltd.+

Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley Research. Investors should consider Morgan Stanley Research as only a single factor in making their investment decision.

For analyst certification and other important disclosures, refer to the Disclosure Section, located at the end of this report.

+= Analysts employed by non-U.S. affiliates are not registered with FINRA, may not be associated persons of the member and may not be subject to FINRA restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account.

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Investment Perspective Ơ ISON

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MLCC is early cycle in AI server & rack penetration

There is immense change underway for the MLCC industry with an investment narrative that is changing as AI chips/server demand is increasingly driving MLCC scarcity. AI is shifting from semiconductors to MLCCs, creating a supply/demand mismatch in high-end components. The high-end AI MLCC market is effectively a Japanese-Korean duopoly with Murata and SEMCO together hold around 85% share. High-capacitance, low-ESL parts for AI accelerators require hundreds to over a thousand dielectric layers with near-zero defects and face strict customer qualification - the barrier preventing a repeat of 201718, when shortages invited entry and the cycle self-corrected. AI platforms now compete directly with consumer, automotive, and industrial applications for advanced materials, heightening supply risk for MLCC traditional customers. We are still in the early innings, and supply concerns are extending beyond near-term shortages to longer-term supply security. As a result, we are seeing an increasing number of long-term supply agreements being signed between suppliers and customers.

Exhibit 1: Sequencing the technology cycle - still early cycle for MLCC

Source: Morgan Stanley Research estimates

Turning point in MLCC pricing

While Murata Mfg.'s CFO and Executive Deputy President Masanori Minamide stated in a Sep 14 Nikkei interview that rising production loads for high-end products are making it increasingly difficult to fully supply low-end products, and that the priority of defending low-end market share has effectively declined, we believe the company's fundamental policy of not changing prices based solely on short-term supply-demand conditions remains intact. That said, in our view, Murata has been gradually shifting its strategy toward focusing more on its areas of strength and adopting pricing that better reflects the need to cover large-scale capital investments, particularly in those core segments where it enjoys a competitive advantage. We believe that Murata's reluctance to enter into LTAs for AI/data-center use value added MLCCs reflects its view that locking in prices today may not be optimal, given the potential for MLCC pricing to rise in the future.

We expect sales growth to continue for small-sized, highcapacity, high-value-added MLCCs for AI servers/DCs

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MLCCs are a key business, accounting for 50% of sales at Murata, 46% at SEMCO, 19% at Yageo, and 70% at Taiyo Yuden in 2025. We expect global MLCC shipment value to expand at a CAGR of 20.3%, from $18.51bn in 2025 to $44.45bn in 2031. We believe growth is set to accelerate from the 5.0% CAGR recorded in global MLCC shipment value over the 13 years of 2012-25 because we expect continued growth in sales of small, highcapacity, high-value-added MLCCs for AI servers/datacenters (DCs) from 2026. For AI servers/DCs alone, we forecast MLCC shipment value to reach $23.33bn by 2031 (vs. our previous estimate of $10.80bn), implying a 57.1% CAGR (vs. 38.1%).

Howard Kao (our Greater China Technology Hardware analyst) expects MLCC demand volume for VR200 NVL72 racks to increase about 80% versus GB300 NVL72 racks, and forecasts the number of MLCCs mounted in each Rubin NVL72 rack will jump to roughly 570,000 units from around 320,000 for GB300 NVL72 racks, with MLCC dollar content per rack estimated to increase by 166%.　We expect the rapid expansion of the high-valueadded MLCC market for AI servers/DCs to be especially positive for earnings at Murata (#1 market share in MLCCs for 2025 at 41%) and SEMCO (#2 at 23%).

Exhibit 2: AI/DC-use MLCC shipment value forecasts (Old)

Exhibit 3: AI/DC-use MLCC shipment value forecasts (New)

e=Morgan Stanley Research estimates; Source: Morgan Stanley Research

e=Morgan Stanley Research estimates; Source: Morgan Stanley Research

Key roles of MLCCs in AI/DC

MLCCs play a role in locally stabilizing power supply (instantaneous current supply plus noise removal) near semiconductors, such as GPUs, CPUs, and FPGAs. Since GPUs, CPUs, and FPGAs repeatedly switch on and off on a nanosecond timescale, they demand large currents instantaneously, and MLCCs meet this instantaneous current demand by immediately discharging their stored charge. As semiconductor miniaturization advances, circuit operating speed increases and drive voltage falls. As voltage decreases, even small voltage fluctuations risk causing semiconductor malfunction, so even more stable power supply voltage is required than before. Demand for capacitor capacitance is also increasing in line with AI servers' rising computing power and power consumption, and because board area and mountable space are limited, we expect demand for smaller, highercapacity MLCCs to persist.

Sharp dips vs. share price peaks provide re-entry opportunity

Year-to-date to Sep 11, share prices of the four companies had risen 127% for Murata, 449% for SEMCO, 141% for Yageo, and 160% for Taiyo Yuden. However, from their respective June-July peaks, these have fallen 40% for Murata, 38% for SEMCO, 52% for

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Yageo, and 59% for Taiyo Yuden. Considering the strong likelihood that high-value-added products for AI servers/DCs will continue to drive growth in MLCC demand not only in 2026 but also from 2027 onward, and that each company's earnings will stay on an expansionary trend, we believe the conditions are now in place to consider re-entering these stocks.

Exhibit 4: Stock performance comparison for 4 MLCC suppliers

Source: FactSet, Morgan Stanley Research

Exhibit 5: ROE-P/B comparison for 4 MLCC suppliers

e=Morgan Stanley Research estimates; Source: Company data, Morgan Stanley Research

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Exhibit 6: Valuation/earnings forecasts comparisons for 4 MLCC suppliers

Note: e=Morgan Stanley Research estimates; Rating data is based on FactSet; FY ends in Mar for Murata and Taiyo Yuden, ends in Dec for SEMCO and Yageo; Based on Sep 11 close price Source: FactSet, Morgan Stanley Research

Earnings and share price risks

We expect capital expenditure on AI/DC to keep expanding and generational transitions to

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continue in GPUs, sustaining growth in demand for small, high-capacity, high-value-added MLCCs. Risks to the continuity of AI/DC capex expansion include: (1) rising risk from the growing practice of hyperscalers and major semiconductor companies charging usage fees in exchange for equity investments in AI development companies, conditional on the use of their own cloud services or semiconductors; and (2) risk that AI/DC capex growth slows due to bottlenecks, such as power infrastructure constraints. If the pace of AI/DC capex growth slows, we cannot rule out that MLCC demand falls short of our base case outlook for demand. Also, as shown in Exhibits Exhibit 8 Exhibit 8 and Exhibit 9 , during the IT bubble around 2000, there was a strong correlation between the YoY change in Murata's and Taiyo Yuden's monthly order intake and their market cap. Since order intake has risen sharply since Jul-Sep 2025, we cannot ignore the possibility that YoY growth in order intake will slow. On the other hand, MLCC demand continues to expand for high-valueadded products for AI/DC, and we expect the major MLCC makers' sales to grow along with an improving product mix.

Exhibit 7: AI ecosystem capital flows

Source: Morgan Stanley Research

Exhibit 8: Murata Mfg: Market cap and order YoY (IT bubble

era)

Source: Company data, Morgan Stanley Research

Exhibit 9: Taiyo Yuden: Market cap and orders YoY (IT bubble era)

Source: Company data, Morgan Stanley Research

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High-value-added products for AI servers will likely drive MLCC market growth

We expect global MLCC shipment value to increase at 20.3% CAGR through 2031

As shown in Exhibit 10 , we estimate that global MLCC shipment value fell for two consecutive years, from $17.47bn in 2021 (up 26.0% YoY) to $14.32bn in 2022 (down 18.1%) and $12.64bn in 2023 (down 11.7%), before rising back up to $13.30bn in 2024 (up 5.2%) and $14.67bn in 2025 (up 10.3%). We increase our forecasts for shipment value from $18.48bn to $18.51bn for 2026 (up 26.2% YoY), from $22.16bn to $24.52bn for 2027 (up 32.4%), and from $25.73bn to $28.60bn for 2028 (up 16.7%), and we expect the market to reach $44.45bn in 2031, growing at a CAGR of 20.3% over the six-year period.

Exhibit 10: Global MLCC market forecasts

e=Morgan Stanley Research estimates; Source: Morgan Stanley Research

AI/DC MLCC market to continue growing at a rapid pace

We expect growth in demand to accelerate for high-value-added products for AI/DC from the second half of 2026. Howard Kao expects MLCC demand volume for VR200 NVL72 racks to increase about 80% versus GB300 NVL72 racks, and forecasts the number of MLCCs mounted in each Rubin NVL72 rack will rise sharply to roughly 570,000 units from around 320,000 units for GB300 NVL72 racks ( Exhibit 11 ). This increase stems from a rise in the number of MLCCs mounted on both compute boards and switch boards, as well as an increase in PCB content across the overall system, including modules such as CX9 Orchid. Howard Kao estimates this increase in MLCC mounting volume will lift the dollarbased MLCC content per rack by 166% ( Exhibit 12 ).

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Exhibit 11: MLCC assumptions for servers

Source: Morgan Stanley Research

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Exhibit 12: MLCC content value per rack comparison between GB300 and VR200

Source: Morgan Stanley Research

Exhibit 13: AI/DC-use MLCC shipment value forecasts (Old)

e=Morgan Stanley Research estimates; Source: Morgan Stanley Research

Exhibit 14: AI/DC-use MLCC shipment value forecasts (New)

e=Morgan Stanley Research estimates; Source: Morgan Stanley Research

Role of MLCCs in AI servers

Capacitors, including multi-layer ceramic capacitors (MLCCs), function as a 'dam' that temporarily stores electricity, and are an essential electronic component for noise removal and voltage stabilization in virtually all electronic circuits, including those used in computers, smartphones, and automobiles. MLCCs play a role in locally stabilizing power supply (instantaneous current supply plus noise removal) near semiconductors such as GPUs, CPUs, and FPGAs. Since GPUs, CPUs, and FPGAs repeatedly switch on and off on a nanosecond timescale, they demand large currents instantaneously, and MLCCs meet this instantaneous current demand by immediately discharging their stored charge. At the same time, MLCCs bypass only the AC component (noise and fluctuating current), which also serves to prevent noise from entering GPUs, CPUs, and FPGAs. MLCCs feature low ESR (low resistance) and low ESL (low inductance), allowing them to track even

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nanosecond-level current fluctuations in semiconductors such as GPUs, CPUs, and FPGAs. MLCCs are often placed around components such as GPUs and ASICs that operate at low voltages of around 1.0V. As semiconductor miniaturization advances, circuit operating speed increases and drive voltage falls. As voltage decreases, even small voltage fluctuations risk causing semiconductor malfunction, requiring an even more stable power supply voltage than before. Demand for capacitor capacitance will also rise along with AI servers' improving computing power and increasing power consumption, and because board area and mountable space are limited, demand for smaller, higher-capacity MLCCs will likely continue.

MLCC miniaturization and higher capacity to accelerate with VR200 NVL72

We assume that the space available for mounting MLCCs on VR200 NVL72 will not change significantly from the GB300 NVL72 rack, and that the transition from GB300 to VR200 will require installing higher-capacity MLCCs within the limited space of semiconductor ABF package substrates and AI accelerator boards, accelerating growth in demand for small-sized, high-capacity MLCCs. Murata has consistently been a leader in MLCC miniaturization and capacity increases, beginning mass production of 1005-size 1 F MLCCs in 2000 and 0402-size 1 F and 1005-size 22 F MLCCs in 2020. We expect demand for 1608-size 100 F, 1005-size 47 F, and 0603-size 10 F MLCCs to increase substantially with VR200 NVL72. We estimate that 1608-size 100 F MLCCs command a unit price 5-10x higher than 2012-size 100 F or 1608-size 47 F MLCCs, and we expect the shift to smaller, higher-capacity MLCCs accompanying the transition to VR200 NVL72 to drive a substantial rise in ASP.

Exhibit 15: High-cap (47uF+) MLCC usage to increase to 30%+ in VR200 (vs <20% for GB300)

Nvidia's Rubin System Uses More High-Cap MLCCs

Source: Morgan Stanley Asia Pacific Research estimates based on supply chain checks. Note: High-cap refers to 47uF+ MLCCs.

High-capacitance MLCCs (47µF+) are likely to capture a disproportionate share of this incremental opportunity: Our analysis suggests that 47µF+ MLCCs could account for approximately 50-60% of the incremental Cloud AI MLCC TAM in CY27, representing an additional ~US$2B market opportunity alone. This reflects both the increasing use of high-

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capacitance devices within AI accelerator systems and a growing mix shift toward highervalue MLCC content.

From a volume perspective, we estimate Cloud AI demand for 47µF+ MLCCs could increase from approximately 4 billion units in CY25 to 40B+ units by CY27: Such a rapid increase would represent a meaningful step-up in industry demand and could require substantial capacity reallocation or expansion among leading suppliers.

Based on our industry discussions, the market for high-capacitance MLCCs remains concentrated among a limited number of suppliers, primarily Japanese and Korean manufacturers, including Murata, Taiyo Yuden, and Samsung Electro-Mechanics (SEMCO). As demand from AI infrastructure accelerates, we believe capacity utilization for these products could tighten, raising the possibility of capacity crowding-out effects across other end markets and applications.

Exhibit 16: Demand for high-cap (47uF+) MLCC is growing at a very fast pace

AI/DC MLCC Demand Split by High/Low-Cap (US$ M)

AI/DC MLCC Demand (US$ M) Source: Morgan Stanley Research; estimates are by Morgan Stanley Research

Exhibit 17: MLCC maximum capacitance by size

(μF)

Note: O denotes products under mass production

Source: Morgan Stanley Research based on Murata Mfg product catalog

Exhibit 18: MLCC size comparison

Source: Morgan Stanley Research

CAmbre 12. Milue composition

Multilayer structure

External electrode structure

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Materials development and production technology behind MLCC miniaturization and capacity increases

In MLCCs, smaller sizes and higher capacities have mainly been achieved by thinning the dielectric and electrode layers (layer thinning) and increasing the number of layers stacked (multilayering). For high-capacity products for AI/DC, in addition to the layer thinning and multilayering described above, efforts are accelerating to further miniaturize and increase capacity by expanding the area of the dielectric and internal electrodes per dielectric sheet. We believe MLCC miniaturization and capacity increases depend on: (1) developing superior dielectric and electrode materials; (2) manufacturing highly uniform, highly reliable slurry; (3) technology for precisely　stacking dielectric sheets; and (4) technology for firing in a controlled atmosphere without oxidation. For high-capacity products for AI/DC, we see the key factors as (1) materials development that increases the crystallinity of dielectric materials while making them finer, in order to thin each dielectric layer as much as possible (layer thinning), together with (2) manufacturing technology to precisely stack the dielectric sheets.

Exhibit 19: MLCC composition

Source: Murata Mfg materials

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Exhibit 20: MLCC production process

Source: Morgan Stanley Research

Dielectric material manufacturing process

Dielectric materials are manufactured by adding a binder, solvent, and additives to barium titanate (BaTiO3), which is produced from barium carbonate (B aCO3) and titanium oxide (TiO2). Methods for manufacturing barium titanate are broadly divided into the solidphase method and the liquid-phase method. In the solid-phase method, barium carbonate and titanium oxide are mixed and fired at high temperature, producing barium titanate through a chemical reaction at the firing stage. In the liquid-phase method, barium carbonate and titanium oxide are dissolved in a solution, reacted at the solution stage, and fired at a relatively low temperature to produce the compound. Manufacturing methods used in mass production via the liquid-phase method include the oxalate method and the hydrothermal synthesis method. Barium titanate with small and uniform particle size is key to smaller and higher-capacity MLCCs. In 2023, Murata established MF Materials, a joint venture with Ishihara Sangyo and Ishihara Sangyo's wholly owned subsidiary Fuji Titanium (with equity stakes of 20% for Murata, 10% for Ishihara Sangyo, and 70% for Fuji Titanium). MF Materials produces barium titanate via the oxalate process and supplies it to Murata Manufacturing.　MF Materials is constructing a new building adjacent to its head office plant in Nobeoka, Miyazaki Prefecture, with operations scheduled to commence in 2027. TDK established a joint venture with Nippon Chemical Industrial in April 2026 called TDK-NCI Advanced Materials (with equity stakes of 51% for TDK and 49% for Nippon Chemical Industrial), with plans to accelerate development of the oxalate method barium titanate.

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Exhibit 21: Situations around Barium Titanate production

Source: Morgan Stanley Research

Murata and SEMCO to benefit the most from growing demand for high-value-added products for AI servers

We expect Murata and SEMCO, which supply small, high-capacity products stably and in large volumes, to capture the greatest benefits from growing demand for small-sized, high-capacity MLCCs used in AI servers and data centers. Murata has explained that AI/DC MLCC sales accounted for 10-15% of its MLCC sales in F3/26 and are forecast to rise 100105% YoY in F3/27, accounting for 20-25% of MLCC sales. We estimate Murata's AI/DC MLCC sales to rise roughly 120% YoY in F3/27 and about 100% YoY in F3/28, with AI/DC MLCCs underpinning growth in the company's overall MLCC sales. Murata has stated that it forecasts a 100-105% increase in AI/DC MLCC sales in F3/27, reflecting a roughly 40% increase in volume and a roughly 50% rise in ASP, but we expect the increase in ASP to exceed its forecast.

2025 MLCC market share was Murata 40.8%, Taiyo Yuden 11.3%

We estimate that global MLCC shipment value totaled $14.67bn in 2025 (up 10.3% YoY), with shares of 40.8% for Murata, 22.5% for SEMCO, 11.3% for Taiyo Yuden, 6.9% for TDK, and 5.4% for Yageo, and a combined 13.0% for all companies outside these top five. We expect demand for high-value-added products for AI/DC to keep expanding from 2027, with Murata and SEMCO continuing to gain market share.

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Exhibit 23: MLCC market share

Source: Company data, Morgan Stanley Research

Exhibit 24: MLCC market share (CY25)

Source: Company data, Morgan Stanley Research

What are the risks to Murata?

Risks for Murata include: (1) losing MLCC market share by failing to adequately supply MLCCs for AI servers/DCs amid rapidly expanding demand. (2) Murata's products, including MLCCs, are used not only in AI servers/DCs but across virtually all electronic equipment, including automobiles, smartphones, and industrial machinery, making the company sensitive to macroeconomic conditions and inventory cycles. (3) The company has explained that a ¥1/$ appreciation of the yen would reduce operating profit by ¥4.5bn per year, and the yen could appreciate beyond our assumed rate of ¥155/$, among other factors.

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Murata Manufacturing earnings forecasts

We expect Murata at 2Q results (end-Oct) to hike F3/27 guidance; continued earnings growth from F3/28

F3/27-28 and F3/27 2Q forecasts: We project F3/27 OP of ¥490.8bn (guidance ¥430bn, FactSet consensus ¥453.9bn), up ¥208.9bn YoY and above F3/22's record of ¥424.1bn. That is because we expect profit in the Components segment to rise ¥186.2bn to ¥501.3bn and losses in the Device & Modules segment to shrink by ¥24.1bn from -¥26.5bn to ¥2.4bn. We look for Components profit to rise due to a +31.6% YoY increase in MLCC sales in dollar terms (+36.1% on yen basis), a continued increase after F3/26's +13.8% rise (+12.6% on yen basis), product mix improvement, and higher utilization rates absorbing increased depreciation and other fixed cost growth. We expect Device & Modules losses to shrink mainly due to the falling out of ¥43.8bn in Resonant goodwill impairment and ¥6bn from the disposal of the micro battery business. We project F3/28 OP of ¥702.6bn (consensus ¥655.3bn). The projected ¥211.8bn YoY growth breaks down as Components + ¥170bn and Devices & Modules +¥39.6bn. We expect Components profit to rise thanks to a 24.5% YoY increase in capacitor (MLCC) sales in dollars (+23.7% on yen basis) and continued product mix improvement absorbing increased depreciation & other fixed cost growth. We look for Devices & Modules profit to rise on factors including increased sales of high-frequency modules, secondary batteries, and vertical power delivery modules.

We project 2Q OP of ¥125bn (consensus ¥122.9bn). The projected QoQ ¥26.6bn growth breaks down as Components +¥12.5bn QoQ to ¥126bn, and Devices & Modules +¥13.9bn QoQ to ¥1bn. For Components, we expect sales of MLCCs for AI/data centers to continue to increase, the MLCC product mix to improve, and utilization rates to continue to rise. For Devices & Modules, we expect sales for North American smartphones to increase seasonally and reenter the black, but because North American smartphone production is split between fall models and spring models, profit contributions are likely to be limited.

Exhibit 25: Murata Mfg: Earnings forecast changes

e=Morgan Stanley Research estimates; Company data; Source: Company data, Morgan Stanley Research

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Exhibit 26: Murata Mfg: Mid-term forecasts

MSe=Morgan Stanley Research estimates; Source: Company data, Morgan Stanley Research

Exhibit 27: Murata Mfg: OP forecasts comparison

Note: Consensus is based on FactSet; Source: Fact Set, Morgan Stanley Research

Murata's share price risk/reward: Even though we raise our earnings estimates for Murata, we lower our DCF-based price target from ¥12,500 to ¥11,000, mainly reflecting an increase in our DCF model's risk-free rate from 2.60% to 3.0%. Murata's share price has fallen 41% year-to-date from its June 22 peak, and we see 53% upside over the next 12-18 months, maintain our OW rating, and designate the stock as our Top Pick in Japan's electronic components industry. The reasons are as follows: (1) We forecast the dollarbased shipment value of MLCCs, where Murata held the top global share of 40% in 2025, to expand at a CAGR of 21% through 2031, with Murata continuing to gradually gain market share. (2) Demand for MLCCs used in AI servers/DCs is likely to continue expanding, and demand for small, high-capacity, high-value-added products, which Murata has brought to market ahead of competitors, should grow substantially. (3) Outside of MLCCs, we look for demand to expand for small, high-value-added products, including secondary batteries for DC BBUs, power modules for vertical power delivery in AI servers, and RF modules for smartphones, and then expand even further as edge AI devices

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become widespread. (4) In addition to earnings growth, we expect that management's proactive approach to shareholder returns, including share buybacks, will raise capital efficiency and lift ROE.

Bull case ¥14,000, 95% projected upside

In our bull case, we assume higher sales of MLCCs for AI servers/data centers than in our base case, for component sales of 7% higher than our base case, for OP of ¥560.3bn in F3/27, ¥794bn in F3/28, and ¥1.515tn in F3/31. Our forex assumptions and DCF assumptions are the same as for our base case. Bull case fair value corresponds to 58.2x of fully-diluted F3/27 EPS of ¥240.4, 41.1x fully-diluted F3/28 EPS of ¥340.7, and 21.1x fullydiluted F3/31 EPS of ¥664.0.

Bear case ¥3,500

Murata products are used in all kinds of different electronic devices, and they are easily affected by the macro economy and inventory cycle. In our bear case, we assume slower global economic growth rates and lower production of high-end consumer goods like high-end smartphones than in our base case for OP of ¥314.6bn in F3/27, ¥330bn in F3/28, and ¥362.4bn in F3/31. Our forex assumptions and DCF assumptions are the same as in our base case. Here we look for ROE to increase from 8.8% in F3/26 to 9.3% in F3/27 and 9.4% in F3/28, above capital cost of 7.5%. With profit below the market consensus, we assume the share price falls to a P/B of 2.4x.

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Risk Reward - Murata Manufacturing (6981.T) Risk Reward - Murata Manufacturing (6981.T) Top Pick

We expect AI/DC use value-added MLCC sales and earnings to continue to expand

¥11,000 PRICE TARGET

Derived from our base case and a DCF model, with the following assumptions: 3.0% risk-free rate, 1.39 equity beta, 3.2% risk premium, yielding 7.5% WACC; zero growth from F3/36.

¥9,896

BASE CASE

¥11,000

Derived from DCF

Earnings continue to grow and beat consensus over the medium/long term due to technological advantages & competitiveness, especially in MLCCs.

Assumptions: OP ¥490.8bn in F3/27, ¥702.6bn in F3/28, ¥1,350.6bn in F3/31; FX ¥155/US$, DCF model (see Valuation Methodology); zero growth from F3/36. Base case fair value equates to P/E 52.0x on F3/27e diluted EPS of ¥211.5, 36.4x on F3/28e diluted EPS of ¥302.0 and 18.6x on F3/31e diluted EPS of ¥592.5.

Source: Refinitiv, Morgan Stanley Research

BULL CASE

¥14,000

Derived from DCF

Demand for AI/DC use MLCC is stronger than in the base case. OP assumptions: ¥560.3bn in F3/27, ¥794.0bn in F3/28, ¥1,515bn in F3/31. Same FX & DCF model assumptions as the base case. Bull case fair value equates to P/E of 58.2x on F3/27 diluted EPS of ¥240.4, 41.1x on F3/28 diluted EPS of ¥340.7, and 21.1x on F3/31 diluted EPS of ¥664.0.

OVERWEIGHT THESIS

• ▪
• We expect AI/DC use value-added MLCC sales and earnings expansion to continue..
• ▪
• Expect a significant increase in the total capacitance required for MLCCs in AI/data center applications, alongside continued miniaturization and further increases in capacitance per unit.
• We expect Murata to remain competitive in MLCCs and other products over the long term.
• In F3/27 onward, we expect module earnings to improve as sales of RF modules rise.

New Data Era: Secular Growth:

Positive Positive

BEAR CASE

¥3,500

F3/27e BPS ¥1,486 x P/B 2.4

Murata remains competitive, but fi nal demand for its components is lower than we

envision. OP assumptions: ¥314.6bn in F3/27, ¥330.0bn in F3/28, ¥362.4bn in F3/31. Same FX assumptions as the base case. Assumes ROE moves from 8.8% in F3/26 to 9.3% in F3/27 and 9.4% in F3/28, higher than our capital cost estimate of 7.5%, but with earnings missing market expectations, P/B drops to 2.4x.

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Risk Reward - Murata Manufacturing (6981.T)

KEY EARNINGS INPUTS

INVESTMENT DRIVERS

• Strength of global manufacturing.
• Over the medium/long term, we think Murata can maintain its tech positioning (MLCC global share of 40%) and increase earnings.

GLOBAL REVENUE EXPOSURE

Source: Morgan Stanley Research Estimate View explanation of regional hierarchies here

MS ALPHA MODELS

3 Month

Horizon

Source: Refinitiv, FactSet, Morgan Stanley Research; 1 is the highest favored Quintile and 5 is the least favored Quintile

RISKS TO PT/RATING

RISKS TO UPSIDE

If total MLCC capacitance in AI/DC applications exceeds our forecast, driving sales of high valueadded MLCCs (smaller, higher capacitance) above our forecasts.

RISKS TO DOWNSIDE

• Since Murata's core products are in all sorts of electronic devices, demand and unit prices could fluctuate widely due to changes in the global economy.
• Slowe MLCC technology innovation.
• We estimate ¥1/$ weakness boosts annual OP by ¥4.5bn.

OWNERSHIP POSITIONING

Inst. Owners, % Active

Source: Refinitiv, Morgan Stanley Research

MS ESTIMATES VS. CONSENSUS

M

SEMCO earnings forecasts

Shawn Kim

AI-driven MLCC growth and pricing to drive sharp earnings acceleration in FY27, with continued growth in FY28

FY26-28 forecasts: We project SEMCO OP of W2.34tn in FY26 (+156% YoY), W5.70tn in FY27 and W8.36tn in FY28, implying further growth of 144% and 47%, respectively. We expect the earnings acceleration to be driven mainly by the Components (MLCC) and Package Solution businesses, while the Optics business remains a relatively modest contributor. In FY27, our projected OP of W5.70tn breaks down as Components W4.56tn, Package Solution W943bn, and Optics W201bn, versus W1.67tn, W510bn, and W165bn, respectively, in FY26. In FY28, we forecast Components OP rising further to W6.55tn, Package Solution to W1.58tn, and Optics to W230bn. As such, we expect SEMCO's consol. OP margin to grow from 8.1% in FY25 to 15.7% in FY26, 24.5% in FY27, and 25.9% in FY28. We maintain the stock as our top pick within our S. Korea Technology coverage.

For Components, we expect profit growth to accelerate as AI-server demand drives both strong MLCC volume growth and a structurally richer product mix. High-end AI MLCC supply remains tight, with lead times exceeding 20 weeks, supply-chain inventories lean following two years of destocking, and book-to-bill at the three high-end suppliers reaching its highest level since the pandemic. Importantly, contract pricing has increasingly been institutionalized through long-term agreements, while the high-end AI MLCC market remains concentrated, with Murata and SEMCO together holding around 85% share. Capacity additions are also unlikely to close the supply-demand gap quickly, as most meaningful new capacity is scheduled for 2027 or later and suppliers are generally targeting only around 10-15% annual output growth. We thus expect tighter supplydemand, higher pricing, and a shift toward high-capacitance, low-ESL AI products to drive Components OP margin from 21.4% in FY26 to 30.9% in FY27 and 30.1% in FY28.

Bull case W3,000,000

Our bull case assumes ABF opportunities from major US CSPs drive stronger content growth, with future ASIC content & volume growth continuing to outpace our base-case expectations. Customer diversification toward non-mobile customers should also reduce earnings volatility and improve profitability. Our bull case, equivalent to 15x FY27e P/B, reflects what we see as an unprecedented super-cycle in the underlying AI-related MLCC and ABF markets.

Bear case W1,350,000

In our bear case, we assume slower content growth in MLCCs and substrates due to greater competition and China's localization, together with prolonged consumer weakness weighing on the Optics business. However, we still expect increasing AI exposure to structurally lift SEMCO's MLCC and ABF ASPs, product mix and margins, given the difficulty commodity suppliers face in penetrating the premium market. Our bear-case value corresponds to 7x FY27e P/B. Key downside risks include a significant pullback in

M

Samsung's mobile flagship cycle, lower SEMCO market share, execution risk in penetrating Chinese smartphone customers, and continued consumer-demand weakness.

M

Risk Reward - Samsung Electro-Mechanics (009150.KS) Risk Reward - Samsung Electro-Mechanics (009150.KS) Top Pick

Dual AI opportunity - ABF and MLCC

W2,620,000 PRICE TARGET

Base case, residual income valuation model. We apply a 10% cost of equity (beta 1.0, equity risk premium of 6.5%, and risk-free rate of 3.5%) and a 5% terminal growth rate. Our base year is 2026 and our forecast period is 2026-36.

W2,384,348

RISK REWARD CHART AND OPTIONS IMPLIED PROBABILITIES (12M)

Key:

Source: Refinitiv, Morgan Stanley Research, Morgan Stanley Institutional Equities Division. The probabilities of our Bull, Base, and Bear case scenarios playing out were estimated with implied volatility data from the options market as of 14 Sep 2026. All figures are approximate risk-neutral probabilities of the stock reaching beyond the scenario price in either three-months' or one-years' time. View explanation of Options Probabilities methodology here

15x 2027E P/B BULL CASE

W3,000,000

ABF opportunities from major US CSPs drive meaningful content growth, and we estimate future ASIC content and volume growth will continue to outpace. Customer diversification into non-mobile companies also lowers earnings volatility and improves profitability. Our bull case implies a 2028e P/B at 15x. We believe this premium is supported by what we view as an unprecedented super-cycle in the underlying industry dynamics.

13x 2027e P/B BASE CASE

W2,620,000

We see a number of catalysts ahead for SEMCO, including a large ABF opportunity in ASIC chip wins, accelerating MLCC growth and FCF inflection. Our long-term conviction in custom silicon opportunities via ABF substrates has grown substantially.

OVERWEIGHT THESIS

• We see long-term improvement in SEMCO's operating profile - multi-layer core ABF capacity sold out from ASIC customers and accelerating AI penetration in MLCC, driving substantial content from rising complexity.
• With the AI computing opportunity and the prospect of a cyclical recovery from 2H26, earnings expectations appear to be lagging significantly based on the current outlook.
• We think the share price will look to discount accelerating EPS estimate revisions.
• Our price target implies 2027e P/B of 13x.

7x 2027e P/B BEAR CASE

W1,350,000

We reflect slower content growth for MLCC and substrates amid competition and China's localization. But AI exposure will structurally increase SEMCO's MLCC and ABF ASP, product mix, and margin with commodity suppliers not easy to penetrate.

M

Risk Reward - Samsung Electro-Mechanics (009150.KS)

KEY EARNINGS INPUTS

INVESTMENT DRIVERS

• AI servers, high-speed networking, Auto 2.0, and smartphone content growth
• Customer diversification away from Samsung Electronics, targeting major CSPs
• MLCC pricing/margin trend

GLOBAL REVENUE EXPOSURE

Source: Morgan Stanley Research Estimate View explanation of regional hierarchies here

MS ALPHA MODELS

3 Month Horizon

Source: Refinitiv, FactSet, Morgan Stanley Research; 1 is the highest favored Quintile and 5 is the least favored Quintile

RISKS TO PT/RATING

RISKS TO UPSIDE

• Price hikes driven by MLCC shortage
• Better-than-expected smartphone demand
• Higher MLCC margin from better yield and product mix
• Strong tailwind from China's consumptionfriendly policies

RISKS TO DOWNSIDE

• Significant pullback in Samsung's mobile flagship product cycle and SEMCO's lower market share
• Execution risk in penetrating Chinese smartphone customers
• Consumer demand headwinds in 2026

OWNERSHIP POSITIONING

Inst. Owners, % Active

84.5%

Source: Refinitiv, Morgan Stanley Research

MS ESTIMATES VS. CONSENSUS

M

Yageo earnings forecasts

Howard Kao

Tightening MLCC Narrative is Unchanged

We forecast CY26 revenue of approximately NT$183B, up 38% y/y, driven primarily by stronger AI-related demand, with a more modest contribution from consumer applications. This demand strength should support broad-based utilization improvement across Yageo's passive component portfolio. Pricing is also turning more favorable, with distributor price increases implemented in 2Q26 and Yageo raising prices for direct customers in 3Q26, as previously highlighted. The combination of higher utilization and firmer pricing should drive meaningful operating leverage. We forecast gross margin expanding to 39.3%, up 310bps y/y, and operating margin reaching 27.4%, up 500bps y/y, supporting EPS of approximately NT$19.79.

Looking into CY27, we expect supply/demand conditions in the mid- and low-end markets to tighten further, sustaining pricing momentum and driving an additional improvement in utilization. We therefore forecast revenue of approximately NT$252B, up 38% y/y. Continued operating leverage should lift gross margin to 43.2%, an increase of 390bps y/y, and operating margin to 33.4%, up 600bps y/y, resulting in EPS of approximately NT$32.11.

Why has the stock been so volatile?

Yageo benefited from a sharp increase in MLCC pricing in 2Q26, driven by a temporary spike in spot-market demand. In our view, ODM/EMS customers accelerated inventory replenishment amid concerns that the ramp in high-end AI-server MLCC demand, particularly alongside Nvidia's Vera Rubin platform, could constrain supply of mid- and low-end MLCCs. Under normal market conditions, these customers typically carry only 3-4 weeks of inventory. However, supply concerns prompted a rapid increase in inventory coverage to approximately 4-6 months .

During this restocking phase, ODM/EMS customers sourced MLCCs from both manufacturers, including Yageo, and distributors. The resulting demand surge drove a sharp increase in spot/distributor pricing and also contributed to the stock's strong performance. However, the pricing move was largely driven by a one-off inventory build. Once customers had secured sufficient inventory, purchasing activity normalized and spot pricing began to soften. This, together with weaker broader market sentiment, led to a pullback of ~50% from the stock's peak of approximately NT$1,140.

At the current share price, however, we believe the risk-reward has become attractive. The underlying fundamentals, and, importantly, our view of the MLCC upcycle, remain intact. Our analysis indicates substantial incremental demand for high-end, high-capacitance MLCCs of 47µF and above, which will require a meaningful increase in dedicated production capacity. We expect this to drive further capacity conversion toward high-end MLCCs, with the resulting crowding-out effect becoming more visible from late CY26 into early CY27. This should progressively tighten supply in the mid- and low-end MLCC market and provide renewed support for pricing.

cxmlbl 4. Tayeo. Cammlyo Eotmmates ullanlye

2026e Earnings Estimates

NTS mn

Net sales

COGS

2028e Earnings Estimates

New

Old

Variance

306,659

Old

New

Variance

182,769

182,769

0%

2027e Earnings Estimates

New

Old

Variance

251,501

251,501

0%

M

Income tax

Net income

EPS (NT$)

Margins (%)

Gross margin

Operating margin

Pre-tax margin

Net margin

-11,428

40,652

19.79

39.3%

27.4%

28.6%

22.2%

-11,660

20.21

41,505

39.6%'

27.7%'

29.2%'

22.7%'

-2%

-2%

-2%

ppt

-0.3

-0.3

-0.6

-19,614

65,937

32.11

43.2%

33.4%

34.1%

-0.5

26.2%

cnta tineman Сал, Палалельі

-20,891

306,659

-157,970

148,688

121,225

-27,463

3,844

125,069

-28,687

0%

5%

-5%

-1%

-6%

-52%

-7%

-7%

-6%

-26,581

Exhibit 28: Yageo vs TAIEX YTD share price performance (%)

Yageo vs. TAIEX YTD performance

39.5%

ppt

3.6

46.1%

48.5%

-2.4

Source: Company data, Morgan Stanley Research.

Earnings Estimates Change

We have fine-tune our model, which drives our CY26-28 EPS reductions by 2%, 6%, and 7% respectively.

Exhibit 29: Yageo: Earnings Estimates Change

e=Morgan Stanley Research estimates; Source: Company data, Morgan Stanley Research

Price Target Discussion and Valuation Methodology

We lower our 12-month price target to NT$1,050 (from NT$1,465): This reflects our lower earnings estimates for CY26-28. Our price target is our base case value, derived from our residual income valuation model. Similar to our analysis of other tech hardware companies within our coverage, we think this methodology provides the most accurate value of the firm by taking into account the cost of equity.

Our key assumptions are:

• Cost of equity of 7.8%:
• ° Risk-free rate of 1.0% (10-year Taiwanese government bond yield);
• ° Equity risk premium of 6.8%;
• ° Beta of 1.1;

cambiol. layeu. Quattelly calmiyo coultaleo

1Q25

2Q25

Net sales

COGS

Total Equity

Net Profit

Gross profit

SG&A

Beta

R&D

Cost of Equity

2029E

352,983

99,850

2030E

404,905

111,832

2028E

306,624

89,152

2031E

463,058

125,252

2026E

32,771

(21,119)

217,162

40,652

2027E

257,880

65,937

2025

2032E

2033E

132,930

(84,800)

528,189

140,283

601,136

2034E

2026E

182,769

682,837

(110,968)

48,130

157,117

2035E

2027E|

251,501

(142,878)

175,971

71,801

M

Spread

Investment income

Disposal of investment

Beginning Equity Capital

PV of Forecast Period

Exchange gain

Other

Pre-tax income

Equity Value

PV of Continuing Value

No. of Shares

Income tax

Projected Price

Implied 2027e PE

Minority interest

Net income

Adj.wtd.avg.shrs (mn)

Implied 2028e PE

EPS

Fully Diluted shares (mn)

Diluted EPS (NTS)

Margins (%)

Operating Margin

Gross Margin

Pretax Margin

Net Margin

QoQ Growth (%)

Sales

Gross Profit

Operating Profit

Pretax Profit

Net Profit

YoY Growth (%)

Sales

Gross Profit

Pretax Profit

35.6

21.5

21.4

15.3

5

No un

-10

4

in co 0s

13.0%

24

217,162

582,581

1,356,663

2,156,406

2.054

1,050.0

14

33x

0

39

24x

36.2

22.9

24.8

19.2

1

7

17

27

7

14

15

117

100

(148)

108

7,173

(1,610)

33

5,530

2,053

2.69

2,459

2.25

35.6

20.8

23.1

17.8

4

11

20

15

49

9

15

31

18

20.0%

23.8%

56

37.3

24.3

24.2

18.8

9

12

15

20

35

63

39

21

Operating Profit

Net Profit

-8

13

82

CAurAs. CAmpanu Anta MArMAn CtAnlAr DaGnarAh. COllArMAn @

22.5%

0

38.5

26.4

27.5

21.2

18

22

18

18

36

47

67

74

88

21.8%

21.1%

0

38

39.6

22.5

47

61

80

71

72

20.5%

2036E

2028E

306,659

(165,373)

859,089

203,000

141,286

(27,229)

24.9%

(22,876)

6.8%

1.0

(4,354)

114.057

1.0%

1,828

7.8%

774,341

197,087

27.1%

108,623

(24,729)

27.4%

1.0

(20,687)

6.8%

1.0

6.8%

1.0%

7.8%

2,121

118,125

(4,042)

83,894

7.8%

1.0%

1,809

19.7%

131,723

19.3%

132,378

1,339

1,382

1,382

• Medium-term growth rate of 12% (down from 16%); 827 827 846

20.1%

17.1%

• Terminal growth rate of 3%. 0 0

52,231

85,703

(11,428)

(19,614)

115.885

(26,581)

Our price target implies 33x 2027e P/E and 24x 2028e P/E. These are above its five-year historical range of 8x to 18x, which we view as justified considering its longer-term transformation story to become a global total solutions provider, moving from passive into active components. In addition, compared to global passive component peers, we believe Yageo stock remains undervalued with higher ROE and margins but lower P/E vs. Japanese peers (which trade on an average at 40x+ P/E). 152

Our bull and bear case scenario values decrease by magnitudes similar to the change to our base case value, to NT$1,490 and NT$480, respectively.

Exhibit 30: Yageo: Residual Income (RI) Model

E=Morgan Stanley Research estimates; Source: Morgan Stanley Research

Exhibit 31: Yageo: Quarterly earnings estimates

Source: Company data, Morgan Stanley Research; E=Morgan Stanley Research estimates.

31,104

(20,018)

7

37

38.1

25.2

27.1

21.0

19

19

23

31

49

44

45

Sxmbll oc. layeu. vunloumluateu l matlulat vurtlllal

Consolidated Income Statement

NTSmn (Year End Dec 31)

2025

Net sales

COGS

Gross profit

Interest income

2026E

182,769

(110,968)

2028E|

306,659

(165,373)

132,930

(84,800)

2027E

251,501

(142,878)

Consolidated Cash Flow Statement

NTSmn (Year End Dec 31)

2025

Operating Cashflow

Net Profits

30,863

23,634

2026E|

45,519

40,652

M

Disposal of investment

Exchange gain

Other

Pre-tax income

Income tax

Minority interests

Net income

Adj. wtd. Avg. shrs (m)

Reported EPS (NTS)

Diluted shrs (m)

Diluted EPS (NTS)

Consolidated Balance Sheet

NTSmn (Year End Dec 31)

Cash

Mkt securities

AR/NR

Inventory

Others

Current Assets

Long-term investments

Fixed assets

Other assets

Total Assets

S/T borrowings

AP/NP

Other ST liabilities

Total Current Liabilities

UT debt

Other LT libilities

Total Liabilities

Common shares

Retained Earnings

Other SH' Equity

Total Shareholders' Equi

100

(742)

(90)

31,120

(7,343)

143

23,634

2,053

11.51

2,053|

11.51

2025

81,473

16,634

27,792

31,636

7,811

165,346

45,572

65,305

114,566

390,789

86,196

18,031

31,852

136,079

57,589

23,124

216,793

5,182

104,669

64,145

173,997

Total Liab./SH's Equity

390,789

Амкак соа лемок Сакіли ВАлАлелЬ. СеЛАлемокІ

7

(333)

280

52,231

(11,428)

151

40,652

2,054

19.79

2,054

19.79

Change of L/T investment

(4,146)

2028E

87,035

89,152

8,866

(846)

(6,896)

(3,241)

(6,920)

(8,000)

0

Exhibit 32: Yageo: Consolidated Financial Summary

Financing Cashflow

Increase in L/T debt

Increase in S/T debt

Issuance of stock

Cash dividends

Other adjustments

FX adjustment

Net change in cash

Consolidated Financial Ratios

Margins (%)

Gross margin

Operating margin

Pretax margin

Net margin

YoY growth (%)

Sales

Operating profits

Pretax profits

Net profits

Others

Cash dividend payout (%)

Cash div (NTS) |

Yield (%)

Net Debt/Equity (%)

Liabilities/Equity (%)

Liabilities/Assets (%)

ROAE (%)

ROAA (%)

AR/NR Turnover (days)

Inventory Turnover (days)

AP/NP Turnover (days)

(400)

115,885

(26,581)

152

89,152

2,054

43.41

2,054

43.41

2028E

224,649

16,634

59,743

59,653

18,019

378,698

45,572

59,197

114,566

598,034

86,196

35,164

62,115

183,476

54,589

53,346

291,411

20,519

221,959

64,145

306,624

598,034

Cash conversion cycle

…TAnininnnhr

Source: Company data, Morgan Stanley Research; E=Morgan Stanley Research estimates.

(827)

(840)

(400)

85,703

(19,614)

152

65,937

2,054

32.11

2,054

32.11

2027E

65,397

65,937

9,163

(827)

(4,837)

(4,039)

(7,114)

(8,000)

M

Risk Reward - Yageo Corp. (2327.TW) Risk Reward - Yageo Corp. (2327.TW)

Demand looks stronger and price increases appear likely - stay OW

NT$1,050.00 PRICE TARGET

Base case, multistage residual income valuation model. Key assumptions: cost of equity 7.8% (risk-free rate 1%, equity risk premium 6.8% and beta of 1.1), medium-term growth rate 12%, terminal growth rate 3%.

NT$1,129.50

Morgan Stanley Estimates

Mean

Consensus Price Target Distribution

NT$740.00

NT$1,465.00

Source: Refinitiv, Morgan Stanley Research

MS PT

Source: Refinitiv, Morgan Stanley Research

BULL CASE

NT$1,490.00

34x 2028e EPS

Demand continues to grow faster than

expected in 2027-28: 1) Demand improves significantly, driving pricing power for Yageo in premium and standard products alike. 2) Yageo makes meaningful progress into AI, driving significant share gains. 3) Yageo takes on more acquisition initiatives to further widen its product portfolio. 4) Severe undersupply leads to continued price hikes for an extended period of time, which helps expand Yageo's margins in 2027-28.

BASE CASE

NT$1,050.00

24x 2028e EPS

Demand remains strong into 2027-28: 1)

Utilization remains high for premium products. 2) Utilization for standard products stabilizes at 70%+ with resilient consumer tech demand. 3) Transformation and synergies are ongoing with continued active initiatives. 4) Yageo continues to drive expansion into the AI realm and slowly gains market share. 5) High utilization rates and inflationary raw material costs result in continued price hikes.

OVERWEIGHT THESIS

• There is fear that leading Japanese and Korean MLCC suppliers are shifting more capacity to cater to the high end, resulting in undersupply for the midrange/low end.
• The same narrative that drove the 2018 cycle is now back in play.
• Utilization rates are increasing, so suppliers are expecting price hikes for the midrange/low end. Distributors and ODMs are both building inventory.
• AI demand is growing and tantalum capacitor pricing may show further price increases in 2H.
• All of this should help support a re-rating in the stock.

Risk Reward Themes

Electric Vehicles:

Positive

Self-help:

Positive

Special Situation:

Positive

View descriptions of Risk Rewards Themes here

BEAR CASE

11x 2028e EPS

Earnings erode as macro conditions weaken and demand falls again in 2027-28: 1) Non-AI demand weakens from 2H26 onward, despite AI demand remaining strong. 2) Pricing power shifts to end customers with heightened competition among peers. 3) Acquisitions do not bear fruit, resulting in layoffs and leading to cost burdens. 4) Automotive and industrial end demand does not recover, hampering Yageo's premium business. 5) Yageo does not make any material advancements into AI.

NT$480.00

M

Risk Reward - Yageo Corp. (2327.TW)

KEY EARNINGS INPUTS

INVESTMENT DRIVERS

• Transformation into global total solutions service provider
• Premium/standard sales mix
• Utilization rates and capacity
• Inventory and pricing

GLOBAL REVENUE EXPOSURE

Source: Morgan Stanley Research Estimate View explanation of regional hierarchies here

MS ALPHA MODELS

3 Month Horizon

Source: Refinitiv, FactSet, Morgan Stanley Research; 1 is the highest favored Quintile and 5 is the least favored Quintile

RISKS TO PT/RATING

RISKS TO UPSIDE

• Faster-than-expected revenue/profit recognition from stronger AI server/notebook demand
• Further price hikes led by stronger pricing power arising from better demand and/or tighter supply

RISKS TO DOWNSIDE

• A sudden bursting of demand for AI
• Inventory risk
• Consumer electronics demand risk

OWNERSHIP POSITIONING

Inst. Owners, % Active

70.4%

Source: Refinitiv, Morgan Stanley Research

MS ESTIMATES VS. CONSENSUS

M

Taiyo Yuden earnings forecasts

We expect expect record profit in F3/29, not F3/28; upgrade the stock from UW to EW

Full-term F3/27 and F3/28 earnings forecasts, F3/27 2Q forecasts: We project F3/27 OP of ¥45.1bn (guidance ¥45bn, FactSet consensus ¥42bn), up +¥25.1bn YoY. We expect sales in dollars of core product capacitors (MLCCs) to increase +22.6% YoY (+27.4% on yen basis), a continued increase following on FY3/26's +10.4% rise (+8.5% on yen basis), and higher utilization rates absorbing increased depreciation expense and other fixed cost increases. We project F3/28 OP of ¥66.1bn (consensus ¥73.1bn), up +¥25bn YoY. We look for sales in dollars of capacitors (MLCCs) to rise +17.3% YoY (+16.6% on a yen basis), absorbing increased depreciation expense and other fixed cost increases. We expect OP to rise ¥83.8bn in F3/29 (consensus ¥107.1bn), surpassing the historical high profit of ¥68.2bn in F3/22.

We project 2Q OP of ¥12.6bn (consensus ¥11bn), up +¥7.8bn from ¥4.8bn in 1Q. We look for MLCC sales to rise +18.1% compared with 1Q and for the utilization rate to rise from 85% in 1Q to 95% in 2Q. With increased sales of inductors for North American smartphones, there should be a major profit increase on 1Q.

Exhibit 33: Taiyo Yuden: Earnings forecast changes

Note: e=Morgan Stanley Research estimates; Source: Company data, Morgan Stanley Research

Exhibit 34: Taiyo Yuden: Mid-term forecasts

Note: MSe=Morgan Stanley Research estimates; Source: Company data, Morgan Stanley Research

M

Note: Consensus is based on FactSet; Source: Fact Set, Morgan Stanley Research

Taiyo Yuden share price risk/reward: We upgrade Taiyo Yuden from UW to EW, as we believe its share price, having fallen 56.0% from its July 1 peak, has limited downside risk and offers 6% upside over the next 12-18 months. We lower our DCF-based price target from ¥12,500 to ¥10,500. This mainly reflects an increase in the DCF model's risk-free rate from 2.60% to 3.0%. We rate the stock EW rather than OW because: (1) In its core MLCC business, we estimate Taiyo Yuden's MLCC market share was 11.3% in 2025, down from 12.7% in 2020, and we think this downtrend continued into 2026, with its market share shrinking to 10.7% in 1Q and 9.9% in 2Q. (2) We believe Taiyo Yuden is lagging behind Murata (No. 1 share) and SEMCO (No. 2) in small, high-capacity MLCCs for AI server accelerator boards, where demand is rapidly expanding. (3) We expect consensus estimates for F3/28 onward to be revised down after 2Q results.

Bull case ¥14,000, 49% projected upside

In our bull case, F3/27 sales of MLCCs for AI servers/data centers are 7% higher than in our base case, for OP of ¥56.5bn in F3/27, ¥85.5bn in F3/28, and ¥176.3bn in F3/31. Our forex assumptions and DCF assumptions match our base case. Bull case fair value corresponds to 50.7x our fully-diluted F3/27 EPS estimate of ¥276.1, 33.6x our fully-diluted F3/28 EPS estimate of ¥417.0, and 15.9x our full-diluted F3/31 EPS estimate of ¥879.1.

Bear case ¥4,500

Taiyo Yuden's care products (MLCCs and inductors) are used in all kinds of electronic devices, and are easily affected by the macro economy and inventory cycle. In our bear case, we assume slower global economic growth rates and lower production of high-end consumer goods like high-end smartphones than in our base case, for OP of ¥39.2bn in F3/27, ¥56.1bn in F3/28, and ¥65.8bn in F3/31. Our forex assumptions and DCF assumptions are the same as in our base case. Here we look for ROE of 7.3% in F3/27 and 10.1% in F3/28, improving to a level above capital cost of 7.9%. With profit below market expectations, we assume the share price falls to a P/B of 1.8x.

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Risk Reward - Taiyo Yuden (6976.T) Risk Reward - Taiyo Yuden (6976.T)

Share price has fallen, but upside potential likely to remain limited

¥10,500 PRICE TARGET

EQUAL-WEIGHT THESIS

Source: Refinitiv, Morgan Stanley Research

BULL CASE

Derived from DCF

MLCC sales exceed the base case. OP ¥56.5bn in F3/27, ¥85.5bn in F3/28, ¥176.3bn in F3/31. Same FX & DCF model assumptions as the base case. Fair value equates to P/E 50.7x on F3/27e diluted EPS of ¥276.1, 33.6x on F3/28e diluted EPS of ¥417.0, and 15.9x on F3/31e diluted EPS of ¥879.1.

¥14,000

BASE CASE

Derived from DCF

Earnings are expanding driven by growth in MLCC sales, but market expectations appear overly high : OP ¥45.1bn in F3/27, ¥66.1bn in F3/28, ¥107.7bn in F3/31. FX assumption: ¥155/US$. Base case fair value equates to P/E 48.1x on F3/27e diluted EPS of ¥218.3, 33.0x on F3/28e diluted EPS of ¥318.5, and 19.8x on F3/31e diluted EPS of ¥530.1.

¥10,500

BEAR CASE

¥4,500

F3/27e diluted BPS ¥2,552 x P/B 1.8

Stays competitive in core products, but slowing end demand drags pro fi ts down. OP

¥39.2bn in F3/27, OP ¥56.1bn in F3/28, ¥65.8bn in F3/31. Same FX and DCF assumptions as in the base case. ROE 7.3% in F3/27, 10.1% in F3/28, improving from 4.5% in F3/26 and higher in F3/28 than cost of capital (7.9%), but with earnings lower than market expectation, P/B falls to 1.8x.

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Risk Reward - Taiyo Yuden (6976.T)

KEY EARNINGS INPUTS

INVESTMENT DRIVERS

• Continuing tech advances via smaller/highercapacitance MLCCs, and Taiyo Yuden's strong tech competitiveness.
• We expect sales of premium MLCCs for AI/data center applications to remain limited.

GLOBAL REVENUE EXPOSURE

Source: Morgan Stanley Research Estimate View explanation of regional hierarchies here

MS ALPHA MODELS

5/5 MOST

3 Month Horizon

Source: Refinitiv, FactSet, Morgan Stanley Research; 1 is the highest favored Quintile and 5 is the least favored Quintile

RISKS TO PT/RATING

RISKS TO UPSIDE

• Increase in premium MLCC sales for AI/DC use.
• Power inductor sales for 5G handsets and others grow steeper than expected.

RISKS TO DOWNSIDE

• We estimate a ¥1/US$ depreciation affects annual OP increases by ¥0.9bn.
• Since MLCCs are fitted in various electronic devices, demand depends to some extent on the rate of global economic growth, and prices can swing widely depending on supply/demand balances.

OWNERSHIP POSITIONING

Inst. Owners, % Active

80.5%

Source: Refinitiv, Morgan Stanley Research

MS ESTIMATES VS. CONSENSUS

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Risk Reward Reference links

1. View explanation of Options Probabilities methodology -

Options_Probabilities_Exhibit_Link.pdf

1. View descriptions of Risk Rewards Themes - RR_Themes_Exhibit_Link.pdf

2. View explanation of regional hierarchies - GEG_Exhibit_Link.pdf

3. View explanation of Theme/Exposure methodology -

4. ESG_Sustainable_Solutions_External_Link.pdf

5. View explanation of HERS methodology - ESG_HERS_External_Link.pdf

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As of August 31, 2026, Morgan Stanley beneficially owned 1% or more of a class of common equity securities of the following companies covered in Morgan Stanley Research: Murata Manufacturing, Samsung Electro-Mechanics, Taiyo Yuden, Yageo Corp..

Within the last 12 months, Morgan Stanley has received compensation for investment banking services from Yageo Corp..

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(as of August 31, 2026)

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Data include common stock and ADRs currently assigned ratings. Investment Banking Clients are companies from whom Morgan Stanley received investment banking compensation in the last 12 months. Due to rounding off of decimals, the percentages provided in the "% of total" column may not add up to exactly 100 percent.

Analyst Stock Ratings

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Unless otherwise specified, the time frame for price targets included in Morgan Stanley Research is 12 to 18 months.

Analyst Industry Views

Attractive (A): The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be attractive vs. the relevant broad market benchmark, as indicated below.

In-Line (I): The analyst expects the performance of his or her industry coverage universe over the next 12-18 months to be in line with the relevant broad market benchmark, as indicated below. Cautious (C): The analyst views the performance of his or her industry coverage universe over the next 12-18 months with caution vs. the relevant broad market benchmark, as indicated below. Benchmarks for each region are as follows: North America - S&P 500; Latin America - relevant MSCI country index or MSCI Latin America Index; Europe - MSCI Europe; Japan - TOPIX; Asia relevant MSCI country index or MSCI sub-regional index or MSCI AC Asia Pacific ex Japan Index.

Stock Price, Price Target and Rating History (See Rating Definitions)

18000

16000

14000

12000

10000

8000

6000

Murata Manufacturing (6981.T) - As of 09/15/26 GMT in JPy

Industry : Electronic Components

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328% 000100

09/01

2023

Stock and Industry Ratings cabbrevigtions belowd appear as + Stock Rating/Industry View

125 0 0

Stock Ratings: Quernight coo Equal-wight dE) Underusight duD Not-Rated iNRo No Rating Huailable iNAD

Industry View: Attractine dAD In-line tI) Caut ious No Rating Effective January 13, 2014, the stocks covered by Morgan Stanley Pacific will be rated relative to the analyst's industry or industry tear's? coverage. Effective January 15, 2014, the industry view benchmarks for Morgan Stanley Asia Pacifie are as follous: releuant MSCI country index or MSCI sub-regional index or MSCI AC Asia Pacific ex Japan Index.

• EVI

• 0./I

4 0 0 0000

3500000

3000000

2500000

2000000

1500000

1000000

500000

2029

Stock Price (Not. Cougned by Current. Analysto Stock Price (Covered by Current Analyst i m

Samsung Electro-Mechanics (009150.KS) - As of 09/15/26 GMT in KRW

Industry : S. Korea Technology

M

2620000

2560000

Stock and Industry Ratings abbreviations belowd appear as + Stock Rating/Industry View Stock Ratings: Queruzight co0 Equal-weight dE! Underweight dUs Not-Rated INR. No Rating Available iNA

Industry View: Attractive iao In-line iI Cautious iC No Rating NRI Effective January 15, 2014, the stocks covered by Morgan Stanley Asia Pacific will be rated relative to the analyst's industry Cop industry team's courage. Effective January 15, 2014, the industry view benchwarts for Morgan Stanley Asia Pacific are as follous: relevant MSCI country

index or MSCI sub-regional index or MSCI AC Asia Pacific ex Japan Index.

• E.C:

• E./I

• 0/A

• 0/1

95000

3Ộ 000

25000

20000

15000

10000

50 0 0

Taiyo Yuden (6976.T) - As of 09/15/26 GMT in JPY

Industry : Electronic Components

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51480

09/01

2020

6/17/26 : U/I

Stock Price (Not. Cougned by Current. Analysto Stock Price (Couered by Current Analyst imm

• U./I

Stock and Industry Ratings abbreviations belowd appear as + Stock Rating/Industry View Stock Ratings: Queruzight co0 Equal-weight dE! Underweight dUs Not-Rated INR. No Rating Available iNA

Industry View: Attractive iao In-line iI Cautious iC No Rating CNR. Effective January 15, 2014, the stocks covered by Morgan Stanley Asia Pacific will be rated relative to the analyst's industry cop industry team'so cougrage. Effective January 15, 2014, the industry view benchwarts for Morgan Stanley Asia Pacific are as follous: relevant MSCI country index or MSCI sub-regional index or MSCI AC Asia Pacific ex Japan Index.

2000

1600

1400

1200

1000

800

600

400

200

Yageo Corp. (2327.TW) - As of 09/15/26 GMT in TWD

Industry : Greater China Technology Hardware

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151.2550

09/01

2025

Stock Price (Not Cougned by Current. Analysto Stock Price (Couered by Current Analyst imm

Stock and Industry Ratings abbreviations belowd appear as + Stock Rating/Industry View Stock Ratings: Quernight too Equal-wight cED Underuzight dUD Not-Rated CHRY No Rating HuailablaiNa i my Baking Auailable INA) Industry View: Attractive iad In-line iI Cautious iC No Rating NRI Effective January 18, 2014, the stocks covered by Morgan Stanley Asia Pacific will be rated relative to the analusts industry Cop industry team'so couerage. Effective January 15, 2014, the industry view benchwarts for Morgan Stanley Asia Pacific are as follous: relevant MSCI country index or MSCI sub-regional index or MSCI AC Asia Pacific ex Japan Index.

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