CCTC (300408) Report Interpretation

Overview

This earnings review argues that CCTC's recovery is developing into a longer MLCC upcycle. HSBC sees AI and data-centre demand reallocating industry capacity toward high-end products, supporting CCTC's prices, utilisation and share gains, and therefore maintains Buy while raising forecasts and its target price.

Core views

CCTC guided for 1H26 net profit of RMB1.79-2.04bn, up 45-65% year-on-year. At the midpoint, HSBC calculates implied 2Q26 profit of about RMB1.13bn, up about 60% year-on-year and about 43% quarter-on-quarter; reported 2Q26 guidance was RMB1.00-1.25bn, up 42-78% year-on-year. Management attributed the performance to higher MLCC shipment volumes and sales value, recovery in prices for some specifications, and stronger optical-component demand from global data-centre construction. The shares had risen 68% since end-April, compared with a 50% gain for the Passive Component Index, but HSBC argues that the market has not fully priced the duration of MLCC supply tightness into 2027, faster capacity ramp-up, or potential expansion into higher-value AI-server applications. The central industry argument is that high-end AI demand is absorbing MLCC capacity through forward supply commitments, rather than merely increasing channel prices. HSBC believes less flexible supply at Japanese and Korean producers should support pricing for CCTC's overlapping general-purpose and high-capacitance MLCC specifications. CCTC's own capacity expansion is expected to create scope for share gains. Frost & Sullivan estimates that China’s MLCC market could reach RMB65.4bn in 2026 and RMB70.9bn in 2027; HSBC estimates CCTC's share can rise from 8% in 2026e to 12% in 2027e. This supports the institution's 2027 volume and pricing assumptions despite soft consumer demand. HSBC raises 2026/27/28e MLCC revenue estimates by 14%/28%/45% and MLCC gross-margin assumptions by 0.5/1.0/1.1 percentage points, reflecting faster capacity ramping, firmer pricing and a better mix. It also raises communication-component revenue by 4%/5%/5% because of continuing data-centre demand for ceramic ferrules, sleeves and packaging products, while leaving SOFC and other-business assumptions unchanged for lack of new public evidence. Group revenue forecasts rise by 6%/13%/20% to RMB12.93bn/RMB17.78bn/RMB22.32bn for 2026-28, while blended gross margin rises to 44.1%/44.7%/45.0%. The revised estimates imply EPS growth at a 36% CAGR over 2026-28 despite dilution from the H-share issuance. HSBC forecasts 2026/27/28 net income of RMB3.945bn/RMB5.722bn/RMB7.292bn, respectively 7%/18%/14% above Wind consensus, with revenue 11%/20%/18% above consensus. CCTC's H-share prospectus states that MLCC applications have expanded into AI servers, and HSBC notes that higher-specification AI and data-centre products generally have stronger profitability. However, the company has not disclosed customers, product positions or revenue contribution, and HSBC explicitly does not assume a core GPU or AI-accelerator customer win in its base case. Existing AI and data-centre sales, improved industry utilisation and capacity reallocation are included; additional qualification for compact, high-capacitance and high-reliability products nearer high-performance processors is treated as upside that could lift ASP and gross margin further. HSBC raises 2026-28 attributable net-profit forecasts by 5-26% and EPS by 1-22%, with the differing net-profit and EPS revisions partly reflecting the H-share issuance in the valuation model. It increases the target price to RMB152 from RMB91 using a PEG-based valuation: 53x 2027e PE, derived from 1.5x sector-average PEG and a 36% 2026-28 net-profit CAGR, applied to 2027e EPS of RMB2.88. The previous valuation used 42x PE, based on 1.2x sector-average PEG and 2025-27 growth, with 12-month forward EPS of RMB2.16. The revised target implies about 20% upside from the RMB126.90 share price, and HSBC maintains Buy because its base case remains above consensus without relying on incremental penetration into the highest-value AI-server MLCC applications.

Analysis framework

HSBC starts with CCTC's 1H26 guidance and the implied quarterly profit trend, then links the operating improvement to MLCC shipment, pricing and data-centre demand. It assesses industry supply reallocation and CCTC's capacity expansion to derive volume, pricing, mix and market-share assumptions, revises segment forecasts, compares estimates with consensus, and values the shares using a PEG-derived PE multiple and forecast EPS.

Methodology notes

• Industry AnalysisSupply-demand framework

  MLCC supply-demand and capacity-reallocation analysis

  The report links AI-related forward supply commitments and constrained supplier flexibility to tighter high-capacitance MLCC supply, firmer prices and CCTC's expected volume and market-share gains.

• Valuation methodsP/E and PEG Valuation

  PEG-derived PE target valuation

  HSBC derives a 53x 2027e PE target multiple from 1.5x sector-average PEG and CCTC's projected 36% 2026-28 net-profit CAGR, then applies it to 2027e EPS of RMB2.88.

• Industry AnalysisVolume-price decomposition

  MLCC revenue and margin forecast revision by shipment, pricing and product mix

  The estimate revisions distinguish the effects of capacity ramping, firmer MLCC pricing and a higher-value product mix on revenue and gross margin.

Asset mapping & comparison

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

• CCTC (300408.CH)

  Primary covered company; expected to benefit from MLCC supply tightness, capacity expansion and AI/data-centre-related demand.

  Strengths

  Rising MLCC shipment and sales value, capacity-ramp potential, and expanding MLCC applications into AI servers.

  Weaknesses

  Customer, product-position and revenue-contribution details for AI-server applications have not been disclosed.

  Comparison

  HSBC estimates CCTC's China MLCC market share can rise from 8% in 2026e to 12% in 2027e; its 2026-28 net-income forecasts are 7-18% above consensus.

  Risks

  Weaker-than-expected MLCC demand or price recovery, lower high-end share gains if competitors cut prices, and lower margins during new-capacity expansion.

• Jiemei Electronic (002859.CH)

  Passive-component peer included in HSBC's A-share valuation comparison.

  Comparison

  Included in the A-share passive-component peer valuation table.

• Boqian NewMaterials (605376.CH)

  Passive-component peer included in HSBC's A-share valuation comparison.

  Comparison

  Included in the A-share passive-component peer valuation table.

Key data

• 1H26 net-profit guidanceRMB1.79-2.04bnUp 45-65% year-on-year.
• Implied 2Q26 net profit at 1H26 midpointcRMB1.13bnUp c60% year-on-year and c43% quarter-on-quarter.
• CCTC China MLCC market-share estimate8% in 2026e to 12% in 2027eHSBC estimate; China MLCC market forecast at RMB65.4bn in 2026 and RMB70.9bn in 2027.
• 2026-28 revenue forecastRMB12.93bn / RMB17.78bn / RMB22.32bnRaised 6%/13%/20% versus prior estimates.
• 2026-28 net-income forecastRMB3.945bn / RMB5.722bn / RMB7.292bnRaised 5%/19%/26% versus prior estimates; 7%/18%/14% above consensus.
• 2027e EPSRMB2.88Used in HSBC's revised valuation; prior 12-month forward EPS was RMB2.16.
• Target valuation53x 2027e PEDerived from 1.5x sector-average PEG and a 36% 2026-28 net-profit CAGR.

Impact & implications

HSBC sees the investment case shifting from a near-term MLCC recovery toward the duration of supply tightness and CCTC's ability to convert its capacity expansion into volume, pricing and share gains. Its forecast and valuation do not depend on an undisclosed AI accelerator supply-chain win, leaving higher-value AI-server qualification as potential upside.

Risks

• MLCC demand recovery and the associated price rebound may be weaker than expected.
• High-end MLCC market-share gains may fall short if competitors reduce prices to compete.
• Gross margin may be lower than expected while CCTC expands new capacity.

What to watch

• CCTC's 1H26 results.
• Evidence of contract-price improvement for MLCC products.
• Further utilisation gains as MLCC capacity ramps.
• Public disclosure of progress in higher-end AI and data-centre applications.