With surging demand for AI, China Jushi’s target price has been raised to RMB 48.

Overview

Morgan Stanley released a report reaffirming its “Overweight” rating on China Jushi (600176.SS) and significantly raising the target price from RMB33 to RMB48. The core rationale behind the report is that the accelerating development of AI infrastructure is profoundly reshaping the supply-and-demand dynamics in the fiberglass industry, particularly in the high-end electronic fabric segment. With its leading advantages in production capacity, cost control, and product certification, China Jushi is regarded as a major beneficiary of this trend. Institutions expect that, with new production capacity coming online and product prices rising, the company’s earnings outlook over the next three years will improve substantially. Moreover, the current valuation remains attractive relative to its peers, making it a potential candidate for a valuation reevaluation.

Core views

AI-driven demand is reshaping the supply‑demand landscape, with both volume and prices of high‑end products rising sharply. The research report highlights robust demand for AI servers, high‑speed switches, and advanced PCBs, which continues to boost consumption of high‑grade electronic glass fibers and electronic fabrics. As manufacturers allocate more capacity to higher‑specification products, supply of standard electronic fabrics—such as the 7628 grade—has tightened, driving their price up by roughly 55% year‑to‑date, from RMB 4.4 per meter to RMB 6.8 per meter. This structural shortage is expected to sustain elevated pricing for both premium and standard electronic fabrics over the next one to two years. Capacity expansion reinforces the company’s industry leadership and secures its position in the growing AI market. On May 13, the company announced a new production expansion project adding 50,000 tons of electronic yarn and 320 million meters of electronic fabric, with over 60% of output earmarked for thin, ultra‑thin, and extra‑thin products tailored for AI‑related applications. The project is slated for completion within 1.5 years, serving as a further supplement to the 100,000‑ton electronic yarn capacity commissioned in March 2026. Currently, the company operates approximately 5,000 weaving machines and has placed orders for an additional 3,900, whereas competitors continue to grapple with constrained machine‑tool availability. Moreover, rising precious‑metal prices have raised the capital‑expenditure threshold across the sector, potentially delaying rivals’ expansion plans and further bolstering Jushi’s pricing power. Earnings forecasts have been significantly revised upward, leaving ample valuation headroom. Based on revised assumptions for sales volumes and pricing, Morgan Stanley has raised its earnings‑per‑share (EPS) estimates for China Jushi for 2026–2028 by 27%, 16%, and 25%, respectively. Average prices are projected at RMB 4,900 per ton for roving and RMB 6.5 per meter for electronic fabric in 2026. Although the stock currently trades at around 23 times its 2026 projected P/E ratio, peer valuations range from 40 to 180 times. The firm believes that the demand surge driven by AI‑related applications will be sufficient to support a reevaluation of the company’s valuation.

Analysis framework

The research report employs a combined approach that integrates top-down analysis of industry sentiment with bottom-up decomposition of company fundamentals. First, by tracking changes in upstream material demand driven by the AI value chain—specifically servers and PCBs—the report identifies supply‑demand gaps and price elasticities in the high‑end electronic fabric segment. Second, it conducts an in-depth assessment of the company’s competitive advantages, including production capacity (measured by the number of looms), cost‑management capabilities, and progress in certifying new products (such as Low DK and Low CTE grades), thereby demonstrating its ability to generate excess profits during an industry upcycle. Finally, the report applies the Residual Income Model for valuation, incorporating a WACC of 7.9% and a stable growth rate of 4% to compute intrinsic value, while conducting scenario analysis (bullish/bearish) to evaluate the risk‑return profile.

Methodology notes

• Valuation MethodologyRIM Residual Income Model

  Residual Income Model

  The research report employs the RIM model to derive the target price. This model posits that a company’s value equals its current book value plus the present value of future excess earnings—i.e., earnings exceeding the cost of capital. Compared with the conventional DCF approach, it places greater emphasis on the sustainability of accounting book value and return on equity (ROE), making it well-suited for valuing asset‑intensive manufacturing firms with high earnings visibility, such as China Jushi.

• Industry/ Sector Analysis FrameworkSupply-and-Demand Framework

  Supply-Demand Mismatch and Price Transmission

  The core logic of the research report rests on supply-and-demand analysis: a surge in AI-related demand (on the demand side) coincides with a contraction in the supply of standard‑grade products, driven by a shift in production capacity toward higher‑end segments, thereby triggering price increases. This represents a quintessential cyclical industry‑analysis framework—anticipating price trends and turning points in corporate earnings by monitoring changes in the supply‑demand gap.

• Competitive and Strategic FrameworkMoat / competitive advantage

  Economies of scale and barriers to entry

  The research report underscores that Jushi’s competitive moat stems from its substantial installed base of weaving machines—over 5,000 units, with an additional 3,900 on order—and its robust cost-control capabilities. At the same time, it notes that rising precious-metal prices have raised the capital-expenditure barrier for new entrants, thereby safeguarding the incumbent industry leader’s market share and pricing power in the near term.

Asset mapping & comparison

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

• China Jushi (600176.SS)

  Key beneficiary stock. As the global leader in glass fiber, it stands to directly benefit from the explosive growth in demand for high‑performance electronic fabrics driven by AI servers.

  Strengths

  The company boasts industry-leading production capacity (with a significantly larger fleet of looms than its peers), strong cost-control capabilities, and is advancing certifications for AI‑specific products such as Low‑DK and Low‑CTE materials. Its new capacity is being strategically allocated to high‑value‑added segments.

  Comparison

  Compared with its peers, Jushi enjoys a distinct edge in loom availability and economies of scale, while its valuation multiple (approximately 23x PE) remains well below the industry average (40x–180x).

  Risks

  Global demand is slowing; raw material prices are rising; and there is a risk of overcapacity in the industry.

Key data

• Target Price Adjustment33 yuan → 48 yuanReflects a higher contribution to earnings from high-end electronic fabrics.
• 7628 electronic fabric price increase~55% YTDRising from RMB 4.4 per meter to RMB 6.8 per meter, this reflects tight supply-demand conditions.
• Upward revision幅度 of the 2026 EPS forecast+27%Upward revisions of 16% and 25% are projected for 2027 and 2028, respectively.
• 2026 Expected PE~23xSignificantly below the peer group’s range of 40x to 180x
• New capacity planning50,000 tons of electronic yarn + 320 million meters of electronic fabricMore than 60% are geared toward AI-related thin and ultra-thin products.

Impact & implications

The research report argues that China Jushi is transitioning from a traditional cyclical building materials supplier to a key materials provider for AI infrastructure. This shift has not only driven both volume and price increases in the short term but has also bolstered the certainty of its long-term growth and raised its valuation anchor. For investors, this implies that, with enhanced earnings visibility, the current valuation offers a favorable margin of safety and significant upside potential. Meanwhile, the rising capital‑expenditure barriers to entry are helping to sustain a healthy competitive landscape, which benefits leading industry players.

Risks

• Global downstream demand has grown less than expected.
• Sharp increases in raw material prices are eroding profit margins.
• Industry capacity has been released more rapidly than expected, leading to a swift narrowing of the supply-demand gap.
• Macroeconomic fluctuations affect fiberglass demand in non-AI sectors.

What to watch

• Progress in product certification for high-end electronic fabrics (such as Low DK and Low CTE)
• The construction and commissioning schedule of the new capacity expansion project (50,000 tons of yarn / 320 million meters of fabric)
• The future price trajectory of standard electronic fabrics such as 7628
• Monthly shipment data for AI servers and the PCB industry chain