J.P. Morgan raises Shandong Sinocera Functional Material's target price to Rmb136, highlighting upside optionality in AI-class MLCC powder

Overview

This report is J.P. Morgan company research on Shandong Sinocera Functional Material Co., Ltd. - A (300285.SZ). The core view is that although the share price has risen sharply, the market is still divided on Shandong Sinocera Materials' earnings upside in high-end MLCC powder and AI server materials chain; with high-end capacity ramping, product mix upgrading, and price transmission, the company still has upside optionality.

Core views

The report maintains Overweight and is bullish on Shandong Sinocera Materials' multi-business growth as a leading domestic platform-like ceramic functional materials company. The most important incremental driver comes from MLCC powder: the company is a top-tier domestic supplier and has hydrothermal barium titanate core technology, capable of mass-producing 50-100nm high-end powder. AI server per-rack MLCC consumption is about 15 times that of traditional servers, and with automotive electronics demand and potential supply constraints of global peers, the report believes AI-grade powder prices and gross margins may rise beyond market expectations. On ceramic substrates, the company is advancing an integrated 'powder + ceramic + metallization' capability through Sinocera Saichuang; LED ceramic substrate supply has stabilized, and low-Earth-orbit satellite RF chip packaging, optical module TEC products, and PCB ceramic substrate testing create medium-term opportunities.

Analysis framework

The report mainly combines industry-chain price pass-through, the company’s capacity add timing, product structure shifts, order/contract liability signals, segment gross margin contribution, and P/E relative valuation to support the target price increase. The upward earnings forecast revisions reflect MLCC price hikes, improved share of AI-grade products, and improvements in sales and margins; valuation uses a 93x one-year forward P/E, corresponding to FY28E EPS of Rmb1.46.

Methodology notes

• Valuation methodsP/E Relative Valuation

  Estimate target price using a one-year forward P/E multiple

  Dec-27 target price of Rmb136 is based on a 93x one-year forward P/E and FY28E EPS of Rmb1.46; the report notes this multiple is at a historical high, but still has peer comparables in FY27/28E P/E.

• Earnings ForecastEPS Revision

  Revise FY27/28E EPS through changes in product mix, pricing, volume, and margins

  The report raises FY27/28E EPS by 21%/30% to Rmb1.20/Rmb1.46, mainly reflecting MLCC price increases, higher share of AI-grade MLCC powder, and improved gross margin in electronic materials.

• Industry Chain AnalysisAI Server and MLCC Price Transmission

  Derive upstream dielectric powder benefit from downstream MLCC price hikes and AI server usage growth

  In March-May 2026, Murata and Samsung Electromechanics raised prices on high-end MLCC by 10-35%, while upstream dielectric powder prices followed by 10-15%; AI server per-rack MLCC usage is around 15 times that of traditional servers and is a key driver of demand and pricing.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• 300285.SZ

  Core coverage name

  Strengths

  Leading domestic ceramic functional materials platform; scarce A-share MLCC ceramic powder supplier in China; expanding high-end powder capacity; multiple drivers from AI servers, automotive electronics, and ceramic substrates.

  Weaknesses

  Valuation is at historical highs; some investors still prefer MLCC components and pure-play PCB names; earnings realization depends on ramping high-end products.

  Comparison

  The report says MLCC components and PCB-chain companies are up about 315% year-to-date, Shandong Sinocera Materials up about 261%, and the ChiNext Composite up about 13%; peers' 2027/28E P/E is about 99x/82x, while Sinocera's target price implies about 88x/72x.

  Risks

  MLCC demand growth below expectations; new orders in dental and aerospace delivery below expectations; solid-state electrolyte and spherical silicon micropowder ramp slower than expected.

Key data

• Current PriceRmb98.82As of 2026-07-01.
• Target PriceRmb136.00Dec-27 target price; previous target price was Rmb60.40.
• FY27E EPSRmb1.20Raised by 21.5% versus prior forecast; the report text states about 21%.
• FY28E EPSRmb1.46Raised by about 30% versus prior forecast, used in the target price calculation with 93x one-year forward P/E.
• Standard MLCC Powder Capacity10,000 tonsCurrent operating standard MLCC powder capacity.
• Planned High-End MLCC Powder Capacity5,000 tonsFor AI servers and automotive applications; 2,000 tons were commissioned by end-2025 and remaining 3,000 tons are expected by end-2026.
• AI Server High-Capacity Powder PriceAbove Rmb100k/tonGross margin around 45-50%, higher than standard consumer-grade powder.
• FY27/28 MLCC Powder Gross Margin Contribution25%/28%Previously forecast at 16%/18%.
• FY25A to FY28E RevenueRmb4,583mn / Rmb5,717mn / Rmb6,800mn / Rmb7,737mnCorresponding to FY25A, FY26E, FY27E, FY28E.

Impact & implications

The investment implication of the report is that Shandong Sinocera Materials is not merely a traditional ceramic functional materials platform, but an A-share name with upstream scarcity in the AI hardware materials chain. If AI-grade MLCC powder prices, AI-grade product mix, and ceramic substrate orders materialize, earnings and valuation could remain supported. However, valuation is already at historical highs, and investment outcomes are highly dependent on high-end capacity ramp-up, customer adoption, and sustained demand.

Risks

• MLCC demand growth is slower than expected.
• New order delivery in dental and aerospace businesses is slower than expected.
• Deployment of solid-state electrolytes and spherical silicon micropowder is slower than expected.
• Current valuation is at historical highs, and if AI-grade mix, price increases, or order realization fall short of expectations, valuation support may weaken.

What to watch

• Whether the remaining 3,000 tons of high-end MLCC powder capacity can be commissioned and enter stable mass production as scheduled by the end of 2026.
• Progress on qualification, orders, and supply for 50-100nm high-end powder from AI server and automotive customers.
• Whether upstream dielectric powder prices continue to track MLCC manufacturer hikes, while AI server high-capacity powders maintain gross margins around 45-50%.
• Progress by Sinocera Saichuang in PCB ceramic substrate testing, large-customer onboarding, and new orders in 2027.
• Whether contract liabilities and order indicators continue to validate demand strength.