Strong AI/data center MLCC demand; Murata can still raise output by more than 20% with existing capacity

Overview

Based on an August 18, 2026 site visit to Fukui Murata Manufacturing's Takefu Plant, the report analyzes Murata Manufacturing's capacity, product mix, and competitive advantages amid rapid growth in AI/data center MLCC demand. Morgan Stanley believes demand will remain strong from Jul-Sep onward and that existing capacity has further room to be unlocked, although the group's high earnings concentration in MLCCs is also a structural issue that needs to be addressed.

Core views

Fukui Murata Manufacturing is Murata's principal MLCC plant and serves as the "mother plant" for advanced products. The site has 6,071 employees and approximately 3,600 manufacturing contractors, for a total workforce of about 9,700. It began producing capacitors in 1951 and MLCCs in 1970, and launched mass production of 0201-size, or 0.25×0.125 mm, MLCCs in 2013. Many of Murata's advanced MLCCs for AI and data centers are manufactured here, and the plant's miniaturization and high-capacitance manufacturing capabilities are an important basis for the report's assessment of the company's competitive position. The key demand-side signal is that the Apr-Jun quarter MLCC book-to-bill ratio reached 1.47, the highest since 2004. Morgan Stanley believes this reflects both genuinely strong demand for high-value-added AI/data center products and advance orders from general-purpose product customers concerned about future shortages and price increases. Approximately 50% of AI/data center MLCCs are produced on general-purpose product lines, while the other approximately 50% come from dedicated production lines. The company must therefore maintain its share in general-purpose products while expanding output of high-value-added products. Apr-Jun capacity utilization was already about 95%, but Nagato Omori, Senior Executive Vice President responsible for the capacitor business, stated that output could still be increased by more than 20% through improvements in productivity and yield, even without adding capacity. AI/data centers are the primary driver of product mix upgrades. Murata expects this application to increase from 10%-15% of total MLCC sales in F3/26 to 20%-25% in F3/27. At its July 31 earnings release, the company raised its F3/27 AI/data center MLCC sales growth forecast from 85%-90% YoY to 100%-105%. Within this, sales volume is expected to grow by slightly less than 50%, while average selling prices are expected to rise by slightly more than 55%. The increase in selling prices mainly reflects the end of price declines and continued product mix improvement. Compared with automotive and smartphone MLCC customers, most AI/data center customers place greater emphasis in negotiations on securing supply volume rather than price, which helps high-value products maintain pricing. To meet demand, Murata plans to expand MLCC capacity by 30%-35% over the two years through F3/28. Morgan Stanley also raised its global MLCC market forecasts. Global MLCC shipment value declined consecutively from $17.47bn in 2021, up 26.0% YoY, to $14.32bn in 2022, down 18.1% YoY, and $12.64bn in 2023, down 11.7% YoY. It subsequently recovered to $13.30bn in 2024, up 5.2%, and rose further to $14.67bn in 2025, up 10.3%. The 2026 forecast was raised from $17.43bn, up 18.8% YoY, to $18.48bn, up 26.0%; the 2027 forecast was raised from $20.89bn to $22.16bn, with the YoY growth rate unchanged at 19.9%; and the 2028 forecast was raised from $24.25bn to $25.73bn, with the YoY growth rate unchanged at 16.1%. The report expects demand growth for high-value-added AI/data center products to continue beyond the second half of 2026. Next-generation GPUs will require higher-capacitance MLCCs due to space constraints on flip-chip substrates and AI accelerator boards. The report believes Murata has a greater opportunity to command a premium based on its high quality and reliability. Reasons include the company's leading position in miniaturized and high-capacitance products; while MLCC capacitance usually declines after a DC voltage is applied, Murata products exhibit little change in effective capacitance; and its products can also maintain stable capacitance in high-frequency operating environments where circuits switch current rapidly. These characteristics enable Murata to benefit more directly from AI hardware requirements for miniaturization, high capacitance, and stability. Over a 22-year historical comparison, Murata's MLCC sales increased from ¥39.5bn in Apr-Jun 2004 to ¥282.5bn in Apr-Jun 2026, equivalent to 7.2 times and a CAGR of 9.4%, while its global share rose from 33.0% to 40.6%. MLCCs' share of group sales increased from 36.1% to 56.2% over the same period, while their share of group operating profit rose from slightly below 50% to nearly 100%. This indicates a significant increase in MLCC scale, share, and profitability, but also means that group earnings have become more concentrated. The report believes that the company must not only expand MLCC output to meet strong demand but also develop second and third earnings pillars outside MLCCs. The cover-page model forecasts group net revenue rising from ¥1,830.9bn in F3/26 to ¥2,044.2bn in F3/27, ¥2,449.7bn in F3/28, and ¥2,830.5bn in F3/29. Operating profit is forecast at ¥281.8bn, ¥431.9bn, ¥624.0bn, and ¥754.3bn, respectively, while basic earnings per share are expected to rise from ¥127.7 to ¥185.6, ¥271.9, and ¥332.8. The report assigns an Overweight rating and names Murata as a top pick, with a target price of ¥12,500 versus the August 18, 2026 closing price of ¥7,496. The target price is derived from a base-case DCF model assuming a 2.6% risk-free rate, equity beta of 1.09, risk premium of 3.2%, WACC of 6.1%, and zero growth after F3/36.

Analysis framework

The report first uses a site visit to the principal plant to confirm production capacity and the advanced-product footprint, then combines the book-to-bill ratio, utilization, productivity, and yield to assess near-term supply elasticity. It subsequently breaks down AI/data center MLCC sales growth into volume and average selling price and analyzes customer purchasing preferences and product mix changes. It then updates global market size forecasts and uses a long-term comparison between 2004 and 2026 to assess Murata's share, business concentration, and earnings contribution. Finally, it derives the target price using company earnings forecasts and a DCF model.

Methodology notes

• Valuation methodologyDCF discounted cash flow

  Base-case DCF valuation

  The report discounts future cash flows at a WACC of 6.1% and applies a 2.6% risk-free rate, equity beta of 1.09, risk premium of 3.2%, and zero-growth assumption after F3/36 to derive the ¥12,500 target price.

• Industry/sector analysis frameworkSupply-demand framework

  Assessing MLCC supply and demand using the book-to-bill ratio, utilization, and potential output increases

  The report uses the 1.47 book-to-bill ratio to confirm demand strength, then evaluates whether supply can meet demand based on utilization of about 95%, the division of production between general-purpose and dedicated lines, and the assessment that existing capacity can support an output increase of more than 20%.

• Industry/sector analysis frameworkVolume-price breakdown

  Volume and price breakdown of AI/data center MLCC sales growth

  The forecast of 100%-105% sales growth in F3/27 is broken down into volume growth of slightly less than 50% and an average selling price increase of slightly more than 55%, illustrating the respective contributions of demand expansion and product mix upgrades.

• Industry/sector analysis frameworkIndustry concentration analysis

  Comparison of long-term market share and business contribution

  The report compares sales, global share, share of group sales, and share of operating profit between Apr-Jun 2004 and Apr-Jun 2026 to measure the strengthening of Murata's competitive position and the increase in earnings concentration.

• (Method outside vocabulary)

  Morgan Stanley ModelWare framework

  The report notes that, unless otherwise specified, the cover-page financial metrics are based on the Morgan Stanley ModelWare framework and are used to formulate revenue, profit, and earnings-per-share forecasts.

Asset mapping & comparison

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

• Murata Manufacturing (6981.T)

  Growth in AI/data center MLCC demand, product premiums, and capacity release are the primary beneficiary channels described in the report.

  Strengths

  Advantages in MLCC miniaturization, high capacitance, effective capacitance stability under DC bias, and stability during high-frequency operation; global share increased from 33.0% to 40.6%.

  Weaknesses

  MLCCs account for 56.2% of group sales and contribute nearly 100% of group operating profit, resulting in highly concentrated earnings sources.

  Comparison

  MLCC sales in Apr-Jun 2026 were 7.2 times those in Apr-Jun 2004, while global share increased by 7.6 percentage points over the same period.

  Risks

  Changes in the global economy could cause substantial fluctuations in electronic component demand and unit prices; demand for high-end smartphones and exchange-rate movements could also affect earnings.

Key data

• Apr-Jun MLCC book-to-bill ratio1.47Highest since 2004
• Apr-Jun capacity utilizationApproximately 95%Management says output can still be increased by improving productivity and yield
• Room to increase output with existing capacityMore than 20%Management's assessment without adding capacity
• AI/data center MLCC sales growth forecast100%-105% YoY growth in F3/27Raised from the previous 85%-90%
• AI/data center MLCC growth breakdownVolume growth slightly below 50%; ASP increase slightly above 55%ASP driven by the end of price declines and product mix improvement
• AI/data center share of sales10%-15% in F3/26; 20%-25% in F3/27Share of total MLCC sales
• MLCC capacity expansion plan30%-35%Cumulative expansion over the two years through F3/28
• Global MLCC shipment value forecast$18.48bn in 2026; $22.16bn in 2027; $25.73bn in 2028Previous forecasts were $17.43bn, $20.89bn, and $24.25bn, respectively
• YoY growth in global MLCC shipment value+26.0% in 2026; +19.9% in 2027; +16.1% in 2028Morgan Stanley's updated forecasts
• Murata MLCC salesIncreased from ¥39.5bn to ¥282.5bnIncreased 7.2 times from Apr-Jun 2004 to Apr-Jun 2026, with a CAGR of 9.4%
• Murata's global MLCC shareIncreased from 33.0% to 40.6%Comparison between Apr-Jun 2004 and Apr-Jun 2026
• MLCC share of group salesIncreased from 36.1% to 56.2%Comparison between Apr-Jun 2004 and Apr-Jun 2026
• MLCC share of group operating profitIncreased from slightly below 50% to nearly 100%Morgan Stanley estimates for Apr-Jun 2004 and Apr-Jun 2026
• Net revenue forecastF3/26 ¥1,830.9bn; F3/27e ¥2,044.2bn; F3/28e ¥2,449.7bn; F3/29e ¥2,830.5bnMorgan Stanley ModelWare framework
• Operating profit forecastF3/26 ¥281.8bn; F3/27e ¥431.9bn; F3/28e ¥624.0bn; F3/29e ¥754.3bnReport cover-page model forecast
• Basic earnings per share forecastF3/26 ¥127.7; F3/27e ¥185.6; F3/28e ¥271.9; F3/29e ¥332.8Report cover-page model forecast
• Valuation parametersRisk-free rate 2.6%; beta 1.09; risk premium 3.2%; WACC 6.1%DCF base case, assuming zero growth after F3/36
• Rating and target priceOverweight; ¥12,500August 18, 2026 closing price was ¥7,496
• FX sensitivityA ¥1/$ change impacts operating profit by ¥4.5bnReport estimate

Impact & implications

The report believes that AI/data center demand for smaller, higher-capacitance, and more stable MLCCs will drive simultaneous improvements in Murata's sales volume, average selling prices, and product mix. Additional output from existing capacity and the capacity expansion plan through F3/28 can support growth. At the same time, MLCCs already contribute nearly all group operating profit, and the rising business concentration makes developing earnings pillars outside MLCCs an important long-term challenge.

Risks

• If the global economic environment changes, demand and unit prices for Murata's principal products could fluctuate substantially.
• If high-end smartphone demand is weaker than the report expects, sales of MLCCs, MetroCirc, and RF devices may come under pressure.
• Exchange-rate movements will affect earnings; the report estimates that a ¥1/$ change would impact operating profit by ¥4.5bn.
• The upside scenario is stronger-than-expected demand for high-end smartphones, in which case sales of MetroCirc, MLCCs, and RF devices could exceed the report's forecasts.

What to watch

• Monitor whether MLCC demand remains strong in Jul-Sep and beyond, as well as the sustainability of advance inventory-building orders within the 1.47 book-to-bill ratio.
• Track whether improvements in productivity and yield can realize the potential to increase output by more than 20% with existing capacity.
• Watch whether F3/27 AI/data center MLCC sales can achieve 100%-105% YoY growth and a 20%-25% share of sales.
• Track execution progress on the 30%-35% MLCC capacity expansion over the two years through F3/28.
• Monitor next-generation GPU demand for high-capacitance MLCCs and whether customers continue to prioritize securing supply over lowering prices.
• Watch whether the company can establish second and third earnings pillars outside MLCCs.