Murata’s MLCC capacity utilization remains at 90%-95%, and its order-to-bill ratio stays relatively strong.
The company expects AI and data center-related sales to grow 85%-90% in fiscal 2027, with more than half of the incremental growth coming from an improved high-end product mix.
Murata plans to advance its capacity expansion pace, and combined with currency and cost factors, its profit margin may improve further in the second half.
On June 23, Goldman Sachs noted in its latest research report that orders for multilayer ceramic capacitors (MLCCs) at Japanese passive components giant Murata Manufacturing remain elevated, with demand from artificial intelligence (AI) servers and data centers still the main driver, while demand from automotive electronics has also begun to show signs of recovery.
The bank said that with capacity utilization maintained at 90%-95% and the high-end product mix continuing to improve, Murata’s earnings may accelerate further in the second half.
Goldman Sachs maintained its “Buy” rating and Conviction List status for Murata Manufacturing, with a 12-month target price of 12,600 yen.
Goldman Sachs expects Murata’s revenue to rise from 1.831 trillion yen in fiscal 2026 to 2.090 trillion yen in fiscal 2027, further to 2.557 trillion yen in fiscal 2028, and to 3.035 trillion yen in fiscal 2029.
Operating profit is expected to increase from 281.8 billion yen to 458.0 billion yen, 663.0 billion yen, and 864.0 billion yen.
Earnings per share are expected to rise from 128.5 yen to 206.8 yen, 310.7 yen, and 420 yen.
(Goldman Sachs forecast for Murata revenue)
AI data center demand continues to drive MLCC prosperity.
At a conference call held on June 22, Goldman Sachs learned that Murata’s current MLCC orders remain at a relatively high level, and its order-to-bill ratio remains relatively strong, basically consistent with performance in the January-March quarter of this year.
The company’s capacity utilization remains at 90%-95%, in line with previous guidance, meaning existing production lines are already operating at a relatively high load.
MLCCs are widely used in smartphones, automotive electronics, servers, power management, and communications equipment, performing basic functions such as filtering, voltage stabilization, and energy storage.
As the performance of individual devices improves and the degree of electronification increases, the per-unit usage and value of MLCCs also rise accordingly.
As one of the global leaders in MLCCs, Murata Manufacturing’s operating performance is generally regarded as an important barometer of demand for consumer electronics, smart vehicles, and data center equipment.
The primary source of strong orders remains AI and data center-related applications.
Large model training, inference deployment, and cloud providers’ continued expansion of computing infrastructure are significantly increasing demand for high-end MLCCs in high-performance servers, power systems, network equipment, and storage devices.
Compared with traditional consumer electronics, AI servers impose higher requirements on power supply stability, high-voltage resistance, reliability, and miniaturization, and the components they require also carry higher technical barriers and added value.
Automotive demand shows signs of recovery. Murata management revealed during an earnings call that demand from automotive applications has also begun to show signs of recovery. For some time, automotive electronics was one of the relatively weak areas in the MLCC industry. Slowing global automotive demand, inventory adjustments, and cooling growth in parts of the new energy vehicle supply chain had all weighed on orders for automotive components. However, the long-term trends in the automotive industry have not changed: electrification, intelligent driving, in-vehicle entertainment systems, and advanced driver assistance systems continue to increase the use of electronic components per vehicle, and automotive MLCCs remain an important structural growth source for the industry. The significance of improving automotive demand lies in the fact that Murata’s growth momentum is expected to gradually expand from a single main line of AI/DC (AI data centers) to broader downstream markets such as automotive. If AI demand remains strong and automotive electronics recover in tandem, supply-demand conditions in the MLCC industry may tighten further, providing additional support for Murata’s capacity utilization, product mix, and pricing power. AI business grows nearly 90%. Murata expects that in the fiscal year ending March 2027, AI and data center-related sales will grow by 85% to 90%. Of that, about 30% to 40% of the growth will come from higher sales volume, while about 50% to 60% will come from product mix improvement. This indicates that growth in Murata’s AI/DC business does not rely entirely on shipping more products, but depends to a greater extent on an increase in the proportion of high-specification, high-performance components. In AI servers and data center equipment, high-performance computing chips, accelerators, storage devices, and high-speed network modules have higher requirements for power supply quality. As device power consumption rises, power systems require more complex filtering and voltage regulation capabilities. MLCCs not only increase in quantity, but also need to feature higher capacitance, lower loss, higher voltage resistance, and stronger reliability. Therefore, Murata’s current average selling price improvement does not mainly rely on across-the-board price increases for existing products, but is achieved by selling products with higher technical specifications and greater added value. No broad price increases for now, but room remains for upward pricing power later. Murata management emphasized that there is currently no plan for comprehensive price increases on similar MLCC products. However, the company expects that with technological changes in AI/DC applications, average selling prices for high-end products will continue to improve. Management also stated that if two types of conditions emerge in the future, the company may consider more direct price adjustments.First, orders may further concentrate in Murata, including customer orders from non-AI/DC fields shifting to the company. For example, if competitors face capacity constraints and cannot deliver on time, or if other manufacturers raise prices first, Murata could gain stronger pricing power.
Second, raw material and other costs may rise significantly. If cost pressure continues to accumulate, the company may need to pass part of the burden to customers through quote adjustments. Capacity expansion pace may move forward. Facing growing AI/DC demand, Murata is maintaining its existing expansion plan: MLCC capacity is expected to grow by about 10% in fiscal 2027, and by 20% to 25% in fiscal 2028, with the additional expansion portion accounting for about 10% to 15%. Although the overall plan remains unchanged, management has sent a more positive signal, hoping to bring capacity online as early as possible. Some of the additional capacity originally planned for release in fiscal 2028 may be put into production by the end of fiscal 2027. At present, Murata is optimizing its overall supply by increasing front-end processes in Japan while shifting part of its consumer electronics and automotive-related capacity to overseas bases. If AI/DC demand accelerates and other applications such as automotive recover at the same time, the company may further discuss new expansion arrangements by the end of 2027. Goldman Sachs noted that as expansion progresses, Murata may increase inventory accumulation. If orders remain strong, rising inventory does not necessarily mean deteriorating demand. Instead, it may reflect advance preparation of capacity and products for subsequent delivery and sales growth. Exchange rates, costs, and inventory may jointly drive profit acceleration in the second half. Goldman Sachs believes that Murata’s profit in the second half faces multiple upward factors. First, an improved product mix in high-end AI/DC products is expected to continue raising average selling prices and drive margin expansion. Second, the yen has been weaker than the company’s previous assumptions, which may also support profit after overseas revenue is translated. As a Japanese manufacturer with a high proportion of overseas revenue, yen depreciation is generally beneficial to its export competitiveness and yen-denominated profit performance. In addition, if pressure from rising material costs is controlled, revenue growth will translate more effectively into profit growth. Goldman Sachs also mentioned that as expansion progresses, inventory may accumulate further. Against the backdrop of improving demand, this can be seen as the company preparing for subsequent sales volume growth, rather than a traditional risk of passive inventory reduction.
