Yageo Earnings Call: BB Ratio Jumps to 2.2, Customers Willing to Pay Premium for Supply Stability, No Share Buyback Plan for Now

Passive components giant Yageo (2327-TW) held its earnings call today (29), with management stating that the book-to-bill (BB) ratio jumped significantly to 2.2 by end-June. Third-quarter operations are expected to remain strong, and if raw material costs continue to rise, the company may consider further price increases. Customers are also showing interest in negotiating long-term supply agreements (LTA) to secure stable supply.

Regarding the recent sharp correction in its stock price, institutional investors asked during the meeting whether the company intends to implement a share buyback to support the stock. In response, Yageo stated it currently has no such plans.

On operational outlook, Yageo expects third-quarter revenue to grow quarter-on-quarter, with gross margin and operating margin continuing to rise. Utilization rates for both standard and specialty products will exceed 90%. Customers remain positive about the second half of the year, with AI demand staying strong and driving growth across various component types. Currently, AI-related products account for approximately 16% of total revenue.

In addition to AI growth, Yageo noted that the industrial sector continues to recover, maintaining growth for six consecutive quarters, while automotive demand is gradually warming up, with overall momentum turning positive. Consumer product demand remains strong, although the notebook PC market remains relatively weak this year. However, new product introductions are expected to drive demand starting from 2027.

Yageo reported that its BB ratio was 1.5 in Q1 but jumped to 2.2 in Q2, reflecting strong demand. From a distribution inventory perspective, agents in Greater China hold about two months of inventory, global agents about four months, and high-service distribution channels about five to six weeks, indicating continued improvement and rising demand.

Yageo pointed out that supply is tight, especially for high-end specialty products, leading customers in AI computing, servers, and storage equipment to show stronger willingness to sign long-term contracts—even willing to pay a premium to ensure supply stability. In addition to optimizing capacity, the company will consider expanding production in Kaohsiung, Suzhou, Vietnam, and Mexico based on demand conditions.