High-End MLCC Powder and New Businesses Drive Growth, but Elevated Valuation Limits Near-Term Upside

Overview

The report focuses on the steady growth of Sinocera's existing ceramic materials businesses, the volume ramp-up of high-end MLCC dielectric powder, and the potential of new products related to AI data centers. Nomura expects product-mix upgrades, the consolidation of SDI, and scale economies in new energy materials to drive rapid earnings growth in 2026-28. However, the current valuation of 58.6x 2027F P/E is already close to its 60x target multiple, leading it to initiate coverage with a Neutral rating.

Core views

Sinocera is a leading ceramic materials manufacturer in China. Initially focused on barium titanate powder for electronic ceramics, the company leveraged its proprietary hydrothermal synthesis process to become a domestic leader in import substitution for MLCC dielectric powder. Since 2014, it has expanded into catalytic materials, biomedical materials, and architectural ceramics through acquisitions. In 1H26, the company recorded revenue of CNY 2.51bn, up 16.6% year over year, and net profit of CNY 363mn, up 9.4% year over year. New energy materials were the primary growth driver, with revenue rising 56.5% year over year to CNY 339mn and gross margin increasing 13.5 percentage points to 34.7%, while the overall performance of other businesses was broadly stable. Electronic materials constitute the report's first core growth theme. Nomura expects MLCC demand to recover, while increased use of high-capacitance MLCCs in AI servers and automotive electronics should drive demand for high-end dielectric powder. The company is raising capacity utilization and expanding high-end powder capacity. The report forecasts MLCC dielectric powder sales volumes of 12.3kt, 13.5kt, and 13.8kt in 2026-28, respectively. Because high-end powder commands higher prices than standard products, an improved product mix is expected to drive overall dielectric powder average selling prices up 4%, 5%, and 10% year over year, respectively. The combination of higher volumes and prices supports a projected 20% revenue CAGR for the electronic materials business in 2026-28. Higher capacity utilization and a greater contribution from high-end products are expected to lift gross margin to 38%-39%, approaching 39% in 2028. Biomedical materials constitute the second growth theme. Population aging is driving demand for dental materials, while zirconia's advantages in aesthetics and durability support further penetration. The report also argues that China's export controls on certain rare-earth materials, including yttria, may constrain overseas zirconia production and create import-substitution opportunities for domestic suppliers. On July 6, 2026, the company completed its acquisition of Australian dental restorative products manufacturer SDI Limited, extending its portfolio from zirconia powder and ceramic blocks to a broader range of restorative products. The company can also use SDI's distribution networks in Europe, the United States, and Australia to expand overseas. Combining domestic demand, import-substitution opportunities, and the consolidation of SDI, Nomura forecasts a 20% revenue CAGR for this business in 2026-28, with gross margin remaining at 51%-52%. The company raised zirconia powder prices by 10%-40% from July 2026, which the report believes could partially pass through higher raw-material costs. In catalytic materials, Sinocera is a major domestic provider of automotive exhaust treatment solutions. Nomura expects stricter domestic emissions standards, broader vehicle-model coverage, and overseas expansion through cooperation with leading international customers to support a 15% revenue CAGR in 2026-28, with gross margin of approximately 42%. Architectural ceramic materials remain under pressure from weakness in China's property market, and the company is attempting to stabilize the business through product innovation and overseas expansion. New energy and AI-related materials represent earlier-stage growth opportunities with greater upside potential. The report forecasts a 33% revenue CAGR for new energy materials in 2026-28, with their earnings contribution gradually increasing as scale expands. Some spherical silica powder used as filler in copper-clad laminates has entered small-scale sales. Ceramic substrates for thermoelectric coolers and multilayer ceramic substrates remain in joint development and customer validation. These new products currently contribute little to earnings, but successful certification and mass production could unlock opportunities in AI data-center applications. The other businesses segment, including architectural ceramics, new energy materials, and AI-related products, is expected to deliver a 19% revenue CAGR in 2026-28, with gross margin rising from 30% in 2026 to 35% in 2028, primarily due to scale economies and a greater share of high-value-added products. Expenses are affected by the acquisition in the near term. Due to transaction-related professional fees arising from the SDI acquisition, Nomura expects the administrative expense ratio to rise to 7.2% in 2026 and the overall operating expense ratio to rise to 20.6%. Increased long-term borrowings are also expected to lift the financial expense ratio to 0.6%. As acquisition-related expenses subside and scale expands, the administrative expense ratio is forecast to decline to 7.0% and 6.8% in 2027-28, the operating expense ratio to 20.4% and 20.1%, and the financial expense ratio to 0.5% and 0.2%. Combining the volume ramp-up of high-end MLCC powder, the consolidation of SDI, and growth in new energy materials, the report forecasts revenue of CNY 5.66bn, CNY 6.75bn, and CNY 7.66bn in 2026-28, representing a 19% CAGR. Net profit is forecast at CNY 891mn, CNY 1.15bn, and CNY 1.40bn, representing a 32% CAGR. Fully diluted normalized EPS is forecast at CNY 0.89, CNY 1.15, and CNY 1.39, increasing 46.9%, 29.2%, and 21.0% year over year. Nomura's earnings forecasts are above market consensus, mainly because it is more optimistic about profit improvement from the premiumization of MLCC powder and scale economies in the new energy business. Free cash flow is expected to rise from CNY 324mn in 2026 to CNY 619mn in 2027 and CNY 1.13bn in 2028, while the company remains in a net cash position throughout the forecast period. The valuation uses a P/E methodology. Nomura derives a CNY 70 target price by applying a 60x target P/E to 2027F EPS of CNY 1.16. The target multiple is above the average 2027 P/E of comparable companies based on Wind consensus; the report summary cites 43.2x, while the detailed valuation page cites 43.6x. The premium is justified by the company's leading position in MLCC dielectric powder, continuing volume growth in high-end products, an improving product mix, and the potential valuation contribution from AI-related businesses. The stock was then trading at 58.6x 2027F P/E and had outperformed the CSI 300 Index by 15.8 percentage points over the month ended August 21, 2026. Because the CNY 70 target price represents only 3.2% upside from the CNY 67.86 closing price, the report initiates coverage with a Neutral rating. Key catalysts are stronger-than-expected high-end powder sales and faster-than-expected progress in AI-related businesses. Regarding ESG, the company's 2025 ESG report indicates that it has established a ceramic-waste recycling system and optimized the calcination and reaction processes for core products such as zirconia and silicon nitride to reduce energy consumption and solid waste per unit of output. The zirconia-waste recycling rate exceeded 75.2%.

Analysis framework

The report first uses 1H26 results to assess current business conditions across each segment and then develops separate revenue and gross-margin forecasts for electronic materials, biomedical materials, catalytic materials, and other businesses. Electronic materials are analyzed by breaking down sales volume, average selling price, and product mix. Biomedical materials are assessed by considering end-market demand, rare-earth export controls, price adjustments, and the consolidation of SDI. New energy and AI-related businesses are evaluated based on small-scale sales, customer validation, mass-production progress, and scale economies. The report then aggregates the segment forecasts, estimates expense ratios, net profit, and cash flow, compares them with market consensus, and finally determines the target price and rating using comparable-company P/E multiples and forecast 2027 EPS.

Methodology notes

• Industry/Sector Analysis FrameworkVolume-Price Breakdown

  Breakdown of MLCC dielectric powder sales volume, average selling price, and product mix

  The report separately forecasts powder sales volumes and average selling-price growth for 2026-28. It attributes higher selling prices and gross margins to an increased share of high-end products, thereby deriving revenue and profit growth for electronic materials.

• Competition and Strategy FrameworkEconomies of scale / learning curve

  Analysis of capacity utilization and scale economies

  The report believes that higher utilization of high-end powder capacity and expansion of the new energy materials business can dilute costs and drive gross-margin recovery in the relevant segments.

• Valuation MethodPE/PEG valuation

  Target P/E valuation based on comparable companies

  Nomura applies a 60x target P/E to forecast 2027 EPS of CNY 1.16 to derive a CNY 70 target price. It attributes the valuation premium over comparable companies to the company's industry position, product upgrades, and AI business potential.

Asset mapping & comparison

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

• Sinocera (300285 CH)

  The core company covered by the report, benefiting from a recovery in MLCC demand, the volume ramp-up of high-end powder, the consolidation of SDI, expansion in new energy materials, and potential AI data-center applications.

  Strengths

  The company owns a proprietary hydrothermal synthesis process and is a domestic leader in import substitution for MLCC dielectric powder. Its businesses span electronic materials, biomedical materials, catalytic materials, and new energy materials, while its product mix continues to move upmarket.

  Weaknesses

  The architectural ceramics business is affected by weakness in the property market, AI-related new products remain at the small-scale sales or customer-validation stage, and acquisition expenses and increased borrowing raise expense ratios in 2026.

  Comparison

  The 60x 2027 target P/E is above the peer average of 43.2x or 43.6x cited in the report, with the premium attributable to the company's industry position, product upgrades, and AI business potential.

  Risks

  Changes in downstream demand, the commercialization progress of new products, and key raw-material prices may cause revenue, gross margin, and earnings to deviate from forecasts.

Key data

• 1H26 RevenueCNY 2.51bnUp 16.6% year over year
• 1H26 Net ProfitCNY 363mnUp 9.4% year over year
• 1H26 New Energy Materials RevenueCNY 339mnUp 56.5% year over year
• 1H26 New Energy Materials Gross Margin34.7%Up 13.5 percentage points year over year
• MLCC Dielectric Powder Sales Volume12.3kt/13.5kt/13.8kt2026F/2027F/2028F
• MLCC Dielectric Powder Average Selling-Price Growth4%/5%/10%Year-over-year growth for 2026F/2027F/2028F
• Electronic Materials Revenue CAGR20%2026-28F
• Biomedical Materials Revenue CAGR and Gross Margin20%; 51%-52%2026-28F
• Zirconia Powder Price Increase10%-40%Implemented from July 2026
• Catalytic Materials Revenue CAGR and Gross Margin15%; approximately 42%2026-28F
• New Energy Materials Revenue CAGR33%2026-28F
• Revenue ForecastCNY 5.66bn/CNY 6.75bn/CNY 7.66bn2026F/2027F/2028F, 19% CAGR
• Net Profit ForecastCNY 891mn/CNY 1.15bn/CNY 1.40bn2026F/2027F/2028F, 32% CAGR
• Fully Diluted Normalized EPSCNY 0.89/CNY 1.15/CNY 1.392026F/2027F/2028F, corresponding to year-over-year growth of 46.9%/29.2%/21.0%
• Free Cash FlowCNY 324mn/CNY 619mn/CNY 1,131mn2026F/2027F/2028F
• Target Valuation60x 2027F P/EBased on 2027F EPS of CNY 1.16
• Current Valuation58.6x 2027F P/EValuation at the time of report publication
• Target Price and UpsideCNY 70.00; +3.2%Relative to the CNY 67.86 closing price on August 21, 2026
• One-Month Relative Performance+15.8 percentage pointsRelative to the CSI 300 Index as of August 21, 2026
• Zirconia-Waste Recycling RateOver 75.2%Based on the company's 2025 ESG report

Impact & implications

The report believes Sinocera's growth profile is shifting further from traditional ceramic materials toward high-end MLCC powder, new energy materials, and products related to AI data centers. Premiumization and scale economies are expected to drive simultaneous improvements in revenue, gross margin, and net profit, while the SDI acquisition expands the product portfolio and overseas channels. However, AI-related products remain at the small-scale sales or customer-validation stage and will make only a limited near-term contribution. Meanwhile, the share price has already significantly outperformed the benchmark, and the current valuation is close to the report's target multiple, resulting in limited upside to the target price.

Risks

• If end-market demand related to MLCCs, new energy, and property is weaker than expected, the company's revenue and earnings may be adversely affected; stronger-than-expected demand would represent upside risk.
• If customer validation or mass-production progress for new products such as spherical silica powder and ceramic substrates is slower than expected, scale economies and AI-related revenue may be delayed; faster progress would represent upside risk.
• If price increases for key raw materials due to environmental policies and export controls exceed expectations, gross margin and earnings may be compressed; smaller increases would benefit profit performance.

What to watch

• Whether sales volume, average selling prices, capacity utilization, and product-mix improvements for high-end MLCC dielectric powder exceed expectations.
• Whether spherical silica powder can move from small-scale sales to bulk supply and whether ceramic substrates can pass customer validation and enter mass production.
• Whether the consolidation of SDI, expansion of overseas distribution channels, and the 51%-52% gross margin for biomedical materials can be delivered.
• Whether new energy materials can maintain rapid growth and increase their earnings contribution through scale economies.
• Changes in the prices of key raw materials such as zirconia and whether the 10%-40% product price increases can effectively pass through costs.