Yageo Earnings: Operating Margin to Bottom Out, Driven by Better Utilization and Operating Expenses

No-moat-rated Yageo’s March-quarter results and June-quarter guidance support our view that the operating margin bottomed out in the March quarter. While the improvement in capacity utilization in the coming quarters is likely to be somewhat slower than we had expected, the company’s operating expense ratio is likely to improve faster due to cost-cutting initiatives. As a result, we maintain our forecast for Yageo’s operating margin to reach 23.0% in the December quarter, up from 17.4% in the March quarter, and maintain our fair value estimate for Yageo of TWD 750.