Maintain Buy and raise target price to RMB232; incremental film capacitor demand from 800VDC has not yet been fully priced in

Overview

This report covers Xiamen Faratronic Co., Ltd. (600563.SS). The core view is that rising power density in AI data centers will drive the adoption of power architectures such as 800VDC, HVDC, and SST, under which film capacitors are better suited for high-voltage scenarios than traditional aluminum capacitors. HSBC maintains a Buy rating and raises the target price to RMB232.

Core views

The report argues that AIDC rack power density is rising from the traditional 2-8kW to around 600kW as represented by Rubin Ultra, which will force data center power architectures to reduce transmission losses and shift toward high-voltage DC. Film capacitors can directly withstand 800VDC and offer longer lifespan and higher reliability, so their usage in HVDC and SST may increase significantly. Faratronic already has a 30-40% share in the solar and new energy vehicle film capacitor markets, and the report expects it to achieve a leading share of about 50% in the AIDC film capacitor market.

Analysis framework

The report combines technological substitution logic, AIDC 800VDC penetration, value per unit of power, assumptions on the company's market share, and a DCF valuation model to derive incremental revenue, earnings upgrades, and target price changes. The valuation comparison also references Jianghai's 2027e PE to assess the attractiveness of the current valuation.

Methodology notes

• Valuation FrameworkDCF Model

  Target price calculation

  The target price of RMB232 is based on the DCF model; key assumptions include a cost of equity or discount rate of about 8.7%, operating cash flow CAGR of about 9%-10% in 2025-37e, a perpetual growth rate of 2.5%, and capex assumptions of about RMB290m in 2026-28e.

• Market Size Estimation800VDC Film Capacitor TAM Estimation

  Incremental demand from AIDC power architecture upgrades

  The report assumes film capacitor value of about RMB100/kW in 800VDC solutions, and that 800VDC penetration in AIDC rises from 30% in 2028 to 90% in 2030, thereby estimating the addressable market to grow from RMB973m to RMB3.4bn.

• Industrial Technology AnalysisComparison of Film Capacitors Replacing Aluminum Capacitors

  Component suitability in high-voltage DC scenarios

  The report believes that in 415VAC structures, aluminum capacitors have advantages in size and capacitance, but in an 800VDC environment, standard aluminum capacitors require series connection and balancing resistors, which may reduce efficiency; a single high-voltage film capacitor can directly withstand 800VDC and also offers longer life and higher reliability.

Asset mapping & comparison

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

• Xiamen Faratronic Co., Ltd. (600563.SS)

  Covered company and core beneficiary

  Strengths

  It holds a leading position in the film capacitor market, with 30-40% share in both solar and new energy vehicles, and may achieve about 50% share in the AIDC film capacitor market.

  Weaknesses

  The share price has already risen 63% year to date, reflecting part of the SST theme expectations; future earnings delivery depends on AIDC demand and the rollout progress of 800VDC.

  Comparison

  Currently about 26x 2027e PE, below Jianghai's about 41x 2027e PE.

  Risks

  New energy vehicle demand below expectations, rising raw material costs, lower-than-expected wind and solar installations, and slower-than-expected adoption of 800VDC solutions.

• Jianghai (002484 CH)

  Comparable company and valuation reference

  Strengths

  As a peer capacitor company, it is used in the report for 2027e PE comparison.

  Weaknesses

  The report mentions concerns about overheated sentiment in related prior research.

  Comparison

  Jianghai's 2027e PE is about 41x, higher than Faratronic's about 26x.

  Risks

  Changes in peer valuation and market sentiment may affect the sector's valuation anchor.

• AI data center 800VDC/SST industry chain

  Demand driver

  Strengths

  High-power-density racks are driving the penetration of high-voltage DC, SST, and flexible DC technologies, which may increase the value per machine of film capacitors.

  Weaknesses

  The pace of industry rollout still depends on the delivery of next-generation AI server infrastructure and the standardization of power architectures.

  Comparison

  Compared with 415VAC structures, the 800VDC environment is more favorable for high-voltage film capacitors to replace some traditional aluminum capacitor solutions.

  Risks

  Slower-than-expected adoption of 800VDC solutions or changes in substitution pathways would weaken the incremental demand for film capacitors.

Key data

• Report Date2026-06-23The report cover date is 23 June 2026.
• Rating and Target PriceBuy；RMB232.00The target price is raised from RMB162.00 to RMB232.00.
• Current Share Price and UpsideRMB168.19；+37.9%The share price is as of the close on June 19, 2026.
• 2028 Earnings Forecast Revision+10%The report raises the 2028 earnings forecast to reflect demand for AIDC film capacitors.
• AIDC Revenue Contribution Forecast2028e RMB486m；2030e RMB1.7bnBased on assumptions of full rollout of 800VDC technology and Faratronic's leading market share.
• AIDC Film Capacitor Market Size2028e RMB973m；2030e RMB3.4bnBased on the assumption that 800VDC penetration rises from 30% to 90%.
• Expected AIDC Film Capacitor Market Shareabout 50%The report believes the company has a strong market position and competitors are expanding capacity slowly.
• Existing Film Capacitor Market Shareabout 30-40% each in solar and new energy vehiclesThe report cites the company's annual report, stating that it is the largest film capacitor supplier in both the solar and new energy vehicle markets.
• Valuation ComparisonFaratronic 26x 2027e PE；Jianghai 41x 2027e PEHSBC believes Faratronic's current valuation remains attractive.

Impact & implications

If 800VDC, HVDC, and SST accelerate adoption in AI data center power systems, demand for film capacitors and Faratronic's revenue elasticity may exceed market expectations. The investment implication of the report is that while the current share price has already risen on the SST theme, the increase in film capacitor usage under the 800VDC solution may still not be fully priced in.

Risks

• Global new energy vehicle demand is weaker than expected.
• Raw material cost inflation is stronger than expected.
• Solar and wind installations are weaker than expected.
• The adoption of 800VDC solutions is slower than expected.

What to watch

• The strength of AI data center demand and the pace of improvement in rack power density.
• Delivery progress of next-generation AI server 800V HVDC power racks in 2029-2030.
• Whether 800VDC penetration in AIDC rises along the path of 30% in 2028 and 90% in 2030.
• Progress in the application of SST and flexible DC technologies in data centers and power distribution networks.
• Changes in Faratronic's market share in EV film capacitors and AIDC film capacitors.
• The company's scale effects, in-house production of key components, and improvements in cost efficiency.
• The pace of competitors' capacity expansion and the potential pricing pressure it may bring.