J.P. Morgan upgrades Murata Manufacturing to Overweight, raises target price to ¥4,800

Overview

This is a J.P. Morgan rating-upgrade report on Murata Manufacturing (6981.T). The firm upgraded the stock from Neutral to Overweight and raised the December 2026 target price from ¥3,500 to ¥4,800. The key reason is that AI server applications are driving rapid expansion in MLCC demand, and industry capacity utilization is now close to the historical level at which supply and demand tighten, price declines slow, and prices stabilize.

Core views

The report's central view is that MLCC supply and demand may tighten starting in the first half of FY2026, downward price pressure may ease in the second half of FY2026, and price declines may effectively stop in FY2027. AI servers, especially the GB300 and Vera Rubin platforms, will support demand growth through higher MLCC content; if the AI cycle lasts longer, price stabilization and profit growth momentum could extend into FY2028. Meanwhile, expectations for high-frequency communications applications within the device modules business have been revised down, but energy and power applications, stable profitability in rechargeable batteries, and the launch of vertical power modules provide some support to earnings.

Analysis framework

The analytical framework combines industry cycle comparison, capacity utilization, AI server platform demand, price trends, and segment earnings forecasts. On valuation, the report shifted from a prior zero-growth ROIC model to a target-price method based on FY2027 EPS and relative P/E, reflecting valuation levels seen at past MLCC cycle peaks.

Methodology notes

• Valuation methodsRelative P/E Valuation

  Multiply FY2027 EPS of ¥239 by 20.2x P/E to derive the December 2026 target price of ¥4,800.

  The 20.2x P/E is derived by applying Murata's 1.4x multiple to the industry's two-year forward consensus P/E of 14.4x under Bloomberg consensus as of March 30.

• Cycle AnalysisMLCC Supply-Demand Cycle Comparison

  Compare current capacity utilization and price trends with the peak levels of the 2017-18 and 2020-21 MLCC cycles.

  The report notes that current MLCC capacity utilization of 87-88% is close to the roughly 90% supply-demand tightness threshold seen in past cycles; historically, this level corresponded to a slower pace of price declines and eventual price stabilization.

• Earnings ForecastSegment Earnings Forecast Revision

  Adjust FY2025-FY2027 operating profit forecasts based on 3Q FY2025 results, new FX assumptions, and the current business environment.

  The report cuts FY2025 operating profit estimates, largely leaves FY2026 unchanged, and materially raises FY2027 to reflect MLCC price stabilization and growth in AI server demand.

Asset mapping & comparison

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

• Murata Manufacturing (6981.T)

  Covered company and rating-upgraded name

  Strengths

  As a leading MLCC maker, it benefits from AI server demand growth; capacity utilization is nearing tight-supply levels; price stabilization could significantly improve profits; FY2027 earnings forecasts have been revised up materially.

  Weaknesses

  Demand from China smartphones and notebooks remains weak; automotive application demand is still subdued; high-frequency communications applications in device modules are expected to be weaker in FY2026-FY2027.

  Comparison

  The report compares the current MLCC cycle with the peaks of the 2017-18 and 2020-21 cycles and argues that the current supply-demand and valuation framework is closer to an upcycle stage.

  Risks

  The AI cycle peaks or lasts for a shorter period than expected, MLCC supply-demand tightening is delayed, end-demand is pressured by factors such as memory supply shortages, RF FEM market share declines, or battery losses widen.

• MLCC Business

  Primary earnings driver

  Strengths

  Demand from AI server applications is growing rapidly, and the GB300 and Vera Rubin platforms are driving higher MLCC content, which should slow and eventually stop price declines.

  Weaknesses

  Demand for some China smartphone and notebook applications is weak, and automotive demand remains in a soft environment.

  Comparison

  Capacity utilization is close to the levels reached before prices stabilized in the two prior cycles.

  Risks

  Supply-demand tightening arrives later than expected, or the AI server demand cycle is shorter than expected.

• Device modules Business

  Segment earnings revision item

  Strengths

  Earnings expectations for energy and power applications have been raised, profitability in rechargeable batteries has started to stabilize, and the vertical power module is scheduled to be fully launched by March 2027.

  Weaknesses

  High-frequency and communications applications have been revised down, and RF FEM sales are expected to decline again in FY2026 before recovering in FY2027.

  Comparison

  Compared with the prior recovery expectation based on management comments at IR Day, the report is more cautious about the FY2026 recovery pace.

  Risks

  RF FEM market share declines, PAMID adoption is below expectations, or battery losses widen again.

Key data

• RatingOverweightUpgraded from Neutral to Overweight.
• Target Price¥4,800December 2026 target price; previously ¥3,500.
• Current Share Price¥3,478As of April 2, 2026.
• Implied Upsideabout 38.0%Calculated using the ¥4,800 target price and the ¥3,478 current price.
• MLCC Capacity Utilization87-88%The level in Oct-Dec 2025 and Jan-Mar 2026, approaching the roughly 90% supply-demand tightness threshold seen in past cycles.
• FY2025 Operating Profit Forecast¥277.0bnPrevious estimate was ¥317.2bn; company guidance is ¥270.0bn, and Bloomberg consensus is ¥280.4bn.
• FY2026 Operating Profit Forecast¥383.8bnPrevious estimate was ¥383.6bn, and Bloomberg consensus is ¥380.4bn.
• FY2027 Operating Profit Forecast¥568.0bnPrevious estimate was ¥477.5bn, with consensus at ¥472.2bn.
• FY2027 EPS Assumption¥239Used to calculate the target price.
• Target P/E20.2xRelative valuation based on the peak levels of past MLCC cycles.
• AI Server MLCC Contentabout +50%The report assumes the GB300 platform in FY2026 and the Vera Rubin platform in FY2027 will drive about 50% growth in MLCC content.
• FX Assumption¥155/$1Changed from ¥152/$1 to ¥155/$1 starting in 4Q FY2025.

Impact & implications

If the report's view plays out, Murata Manufacturing's earnings leverage will mainly come from easing downward pressure on MLCC prices, without necessarily requiring immediate price increases. If the AI server cycle lasts longer, the contribution of price stabilization to profits could continue; however, if the AI cycle peaks, end-demand is weaker than expected, or automotive MLCC inventory adjustments are delayed, the target price and rating could face downside risk.

Risks

• MLCC supply-demand tightening arrives later than expected.
• The AI cycle peaks or lasts for a shorter period than expected.
• End-demand is weaker than expected due to memory supply shortages or other factors.
• RF FEM market share declines at major smartphone customers.
• Battery losses widen again.
• Automotive MLCC inventory adjustments end later than expected.
• The company has not raised prices yet, so if price stabilization falls short of expectations, the earnings-upgrade thesis will weaken.

What to watch

• Whether MLCC supply and demand tighten as expected in the first half of FY2026.
• Whether MLCC price declines slow materially in the second half of FY2026 and then stop falling in FY2027.
• Whether AI server MLCC demand from the GB300 and Vera Rubin platforms reaches the report's assumptions.
• Whether the AI cycle extends into FY2028, thereby sustaining price stabilization and profit growth momentum.
• Whether demand in automotive applications and customer procurement support improve.
• Whether design wins and market share for RF FEMs change in 2026 flagship smartphone models.
• Profit stability in rechargeable batteries and the mass-production progress of the vertical power module.