Murata Mfg. (6981): Goldman Sachs reiterates Buy on Murata as strong MLCC demand and AI-related mix gains reinforce earnings upside

Overview

This conference-call note argues that Murata's MLCC cycle remains strong in both the near and longer term. Goldman Sachs sees rising utilization, expanding production capacity, a favorable AI/data-center mix and improving devices/modules earnings as reinforcing its Buy view.

Core views

Goldman Sachs reports that MLCC orders remain strong. After a 25-30% month-on-month surge in June, order levels stayed high in July, eased in August because of the Obon holidays, and were expected to rise seasonally in September. On that pattern, the July-September book-to-bill ratio could remain very strong, around or slightly below the April-June ratio of 1.47x, while backlog continues to build. Demand strength is most pronounced in AI/data-center applications; smartphone demand is increasing seasonally, whereas automotive demand is flat. The firm highlights a potential further lift to MLCC output. Murata's original utilization path was just under 95% in April-June, around 95% in July-September, and above 95% in the second half. Management is focused on how far utilization and output can rise beyond that trajectory, with factories operating through Obon and Silver Week. Settled specification changes for AI/data-center MLCCs should make production-line management more efficient and support output expansion beyond equipment capacity. Capacity-expansion plans are proceeding as intended: slightly above 10% growth in FY3/27 and 20-25% in FY3/28. Looking beyond that, Murata is considering further expansion that includes buildings in anticipation of demand growth from FY3/29 onward, with a decision sought during FY3/27. Goldman Sachs also notes management's expectation that AI/data-center applications could rise to 20-25% of MLCC sales in FY3/27 and just under 40% in FY3/28, strengthening the company's mix and competitive position. On pricing, Murata's stance remains to avoid broad price increases and respond locally. Management identified three conditions that could support increases: competitors' price increases causing customers to shift orders to Murata, higher internal production costs, and a need to manage distributor demand. In automotive price-revision discussions from January, the company is focused more on avoiding price cuts than securing increases. Goldman Sachs nevertheless sees scope for a large profit benefit in FY3/28 as the year-on-year drag from price declines diminishes. The note also sees improving earnings visibility in devices/modules. For FY3/28 RF-model design-ins, Murata aims to gain transmission-section share in addition to its reception-section position, while BBU/AI power-supply expansion is progressing to plan. Goldman Sachs therefore believes the certainty of FY3/28 earnings improvement in devices/modules is increasing. Goldman Sachs maintains Murata as a core Japanese electronic-components/semiconductor name and expects a second upward revision for the current fiscal year at the interim results announcement. It believes market attention is shifting from extreme MLCC price-hike expectations toward sustainable earnings growth and competitiveness based on product development and production technology. The firm retains Buy (on CL), a 12-month ¥12,900 target price and its view that the share price can rise over time.

Analysis framework

The report uses management-call takeaways to assess MLCC order momentum, book-to-bill, backlog, capacity utilization, production expansion, end-market demand and pricing. It then links these operating factors to earnings visibility, product mix and valuation, using an FY3/29E EV/GCI versus CROCI/WACC framework.

Methodology notes

• Industry AnalysisSupply-demand framework

  MLCC supply-demand analysis

  Goldman Sachs evaluates orders, backlog, book-to-bill, utilization, capacity additions and customer demand by application to judge the tightness and durability of the MLCC cycle.

• Industry AnalysisVolume-price decomposition

  Volume, capacity and pricing effects

  The report distinguishes demand and output expansion from pricing, noting that profit growth can come from higher utilization, mix improvement and a reduced drag from year-on-year price declines even without broad price hikes.

• Valuation methods

  FY3/29E EV/GCI versus CROCI/WACC valuation

  Goldman Sachs bases its target on an enterprise-value-to-GCI comparison against CROCI/WACC, applying an 80% premium to its sector multiple of 10x; this implies an FY3/29E P/E of 30x.

Asset mapping & comparison

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

• Murata Mfg. (6981.T)

  Primary covered company; Goldman Sachs views it as a core Japanese electronic-components and semiconductor-sector name.

  Strengths

  Strong MLCC orders and backlog, high utilization, production technology, AI/data-center mix expansion, and improving FY3/28 devices/modules earnings visibility.

  Weaknesses

  Automotive MLCC demand is flat, and management's pricing posture is focused on avoiding cuts rather than broad increases.

  Comparison

  Goldman Sachs applies an 80% premium to its 10x sector multiple in its valuation framework.

  Risks

  Smartphone production-volume decline, deterioration in MLCC supply-demand, and yen appreciation.

Key data

• June MLCC order growth+25-30% month on monthOrders surged in June before remaining high in July.
• April-June MLCC book-to-bill ratio1.47xJuly-September is expected to remain near or slightly below this very strong level.
• MLCC utilization guidanceJust under 95% in April-June; around 95% in July-September; over 95% in 2HManagement is assessing further output expansion.
• MLCC capacity expansionSlightly above 10% in FY3/27; 20-25% in FY3/28Plans are on track, with additional building-inclusive capacity under consideration for demand from FY3/29.
• AI/data-center share of MLCC sales20-25% in FY3/27; just under 40% in FY3/28Management's indicated potential mix trajectory.
• Target price and implied upside¥12,900; 66.2%Based on a price of ¥7,763 as of 18 Sep 2026 close.
• Valuation framework80% premium to a 10x sector multipleFY3/29E EV/GCI versus CROCI/WACC, implying FY3/29E P/E of 30x.

Impact & implications

Goldman Sachs believes Murata's investment case increasingly rests on sustainable earnings growth rather than solely on expectations of MLCC price hikes. Higher utilization, possible output gains beyond equipment capacity, AI/data-center mix improvement, planned capacity additions and improving devices/modules prospects are presented as the key supports for earnings growth through FY3/28 and beyond.

Risks

• A decline in smartphone production volumes could weaken demand.
• A deterioration in MLCC supply-demand conditions could pressure the outlook.
• Yen appreciation is an explicit risk.

What to watch

• Whether the July-September MLCC book-to-bill ratio remains near the April-June 1.47x level and backlog continues to rise.
• The extent to which utilization and output can increase beyond current guidance.
• Progress on FY3/27 and FY3/28 MLCC capacity additions and a possible FY3/27 decision on further building-inclusive expansion.
• The interim earnings announcement, where Goldman Sachs expects a second upward revision for the current fiscal year.
• Progress in AI/data-center MLCC mix, FY3/28 RF design-ins and BBU/AI power-supply expansion.