Murata Manufacturing: AI-Driven Tightening of MLCC Supply-Demand Doubles Target Price to JPY 15,200

Overview

JPMorgan published an in-depth review of Murata Manufacturing, with the core view that the company is evolving into a top-tier AI concept stock driven by explosive demand for MLCCs (Multilayer Ceramic Capacitors) used in AI servers. The report significantly raised the company's earnings forecasts for the next three years and increased the December 2026 target price from JPY 7,000 to JPY 15,200, while maintaining an 'Overweight' rating. The firm believes that rising power consumption in AI accelerators is driving a surge in high-end capacitor usage, which, combined with industry capacity expansion bottlenecks, will lead to a prolonged period of tight supply-demand in the MLCC market, thereby driving a dual leap in Murata Manufacturing's revenue scale and profitability.

Core views

AI Server Demand Reshaping Growth Curve: The report notes that demand for MLCCs in AI servers is growing far faster than previously expected. With the increase in Thermal Design Power (TDP) of AI accelerators, MLCC content per unit has risen significantly. JPMorgan estimates that Murata Manufacturing's AI server-related MLCC sales will grow 2.4x YoY in FY2026 and FY2027, and 1.9x in FY2028. The share of AI server MLCCs in total company sales is projected to soar from 5-6% in FY2025 to nearly 40% in FY2028, becoming the absolute core growth engine. Tightening Supply-Demand Dynamics and Price Stabilization: On the supply side, due to the highly customized nature of MLCC production equipment and high in-house manufacturing ratios, industry-wide capacity growth is unlikely to exceed 20%, and physical bottlenecks regarding factory space may emerge post-2028. On the demand side, beyond AI servers, automotive OEMs are also beginning to worry about procurement risks. The report expects industry capacity utilization to breach the critical 90% threshold in Apr-Jun 2026; historically, this significantly weakens customers' bargaining power. MLCC price declines are expected to stabilize in H2 2026, with potential structural price increases in 2027-2028. Product Mix Optimization Driving Margin Leap: Beyond volume growth, quality improvement is even more critical. AI servers require massive volumes of small-size, high-capacity high-end capacitors (e.g., 1005 size/47uF), which command extremely high unit prices. The report emphasizes that the market currently underestimates the marginal profit improvement brought by generational product transitions. As the shipment share of high-end AI MLCCs increases, the company's blended margin will optimize significantly, with FY2028 operating margin expected to reach 36.4%, far exceeding traditional cyclical levels. Significant Earnings Forecast Upgrades: Based on the above logic, JPMorgan raised its FY2026/FY2027/FY2028 operating profit forecasts to JPY 411.7 billion, JPY 672 billion, and JPY 1.01 trillion, respectively, significantly above company guidance and market consensus. Long-term forecasts for FY2029 and FY2030 were also introduced at JPY 1.27 trillion and JPY 1.57 trillion, reflecting extreme optimism regarding the company's medium-to-long-term growth.

Analysis framework

The report employs a typical 'Volume-Price Split + Supply-Demand Framework' analysis method. It starts with downstream AI accelerator TDP (Thermal Design Power) data to quantitatively derive upstream MLCC usage growth; secondly, it assesses rigid supply-side constraints by combining industry capex and equipment self-manufacturing characteristics; finally, it calculates profit elasticity through product structure upgrades (ASP increases). For valuation, a forward P/E method was adopted, referencing relative valuation multiples at the peaks of the previous two MLCC cycles, assigning a 28x P/E multiple to FY2029 earnings, reflecting the pricing logic for an AI super-cycle.

Methodology notes

• Industry/Sector Analysis FrameworkSupply-demand framework

  Relationship Between Capacity Utilization Thresholds and Pricing Power

  The report indicates that when MLCC industry capacity utilization exceeds 90%, customers' bargaining power weakens significantly, and prices tend to stabilize or rise. This is a key leading indicator for judging shifts in bargaining power in manufacturing analysis, helping investors identify cyclical turning points.

• Industry/Sector Analysis FrameworkVolume-Price Split

  AI TDP-Driven Volume and Price Growth Model

  By analyzing the increase in AI chip Thermal Design Power (TDP), the model simultaneously derives the increase in MLCC usage (volume) and the unit price increase (price) resulting from product iteration toward high-capacitance, small-size form factors. This decomposition method captures value addition in upstream components more precisely than simply looking at terminal shipment volumes.

• Valuation MethodologyPE/PEG valuation

  Anchoring to Relative Valuation at Cycle Peaks

  In setting the target price, rather than simply using the current industry average PE, the analysts selected the premium multiple (1.4x) of the stock relative to the industry at the peaks of the previous two MLCC cycles as an anchor. This method is suitable for strong cyclical growth stocks, aiming to provide a historical basis for valuation expansion during the upswing phase of the cycle.

Asset mapping & comparison

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

• Murata Manufacturing (6981.T)

  Core Beneficiary: Explosive AI server MLCC demand directly drives revenue and profits; technological barriers secure market share

  Strengths

  Globally leading MLCC manufacturing technology and capacity scale; first-mover advantage in small-size, high-capacity high-end products required for AI servers; robust financial position with net cash supporting sustained R&D and capacity expansion

  Weaknesses

  Rapidly increasing reliance on the single AI track, making it vulnerable if AI investment slows; potential factory space constraints post-2028 could limit long-term expansion speed

  Comparison

  Compared to peers like Taiyo Yuden and TDK, Murata has a more advanced product roadmap and higher market share in the high-end AI MLCC segment, resulting in greater earnings elasticity in this AI cycle

  Risks

  AI cycle peaking; widening losses in battery business; loss of RF FEM market share; weak terminal demand due to memory shortages or other macro factors

Key data

• FY2028E AI Server MLCC Sales ShareNearly 40%Significant increase from 5-6% in FY2025, becoming the largest application scenario
• FY2028E Operating Profit ForecastJPY 1.01 TrillionRaised by 34.7% from previous forecast of JPY 750.2 billion, far exceeding market consensus of JPY 659.5 billion
• FY2029E EPS ForecastJPY 541Serves as the valuation basis for the new target price of JPY 15,200
• Industry Capacity Utilization Tipping Point>90%Expected to be breached in Apr-Jun 2026; historically corresponds to price stabilization periods
• FY2028E EBIT Margin36.4%Margin expands significantly benefiting from improved high-end AI MLCC mix

Impact & implications

For Murata Manufacturing, this signifies a transformation from a traditional consumer electronics/automotive cyclical stock to a core AI infrastructure play. If supply-demand tightness and margin improvement materialize as expected in H2 FY2026, the stock price is poised to embark on a new rally. For the broader passive component industry, the high-standard demands of AI servers are reshaping the competitive landscape; leading manufacturers with advanced processes and mass-production capabilities for small-size, high-capacity products will reap excess returns, while low-end capacity may face risks of being squeezed out or marginalized.

Risks

• Premature peaking or slowdown in AI investment cycle
• Recurring widening of losses in battery business dragging down overall profits
• Loss of market share in smartphone RF Front-End Modules (RF FEM)
• Weaker-than-expected terminal demand due to memory supply tightness or other macro factors
• Prolonged MLCC supply-demand tightness leading customers to seek alternative solutions

What to watch

• Whether MLCC industry capacity utilization breaches 90% as scheduled in Apr-Jun 2026
• Actual shipments and pricing of high-end products like 1005/47uF for AI servers in H2 FY2026
• Whether non-AI customers (e.g., automotive, IT) accept price hikes or shift to smaller-size products
• Clear statements from the company regarding new factory site selection and capacity expansion plans post-2028