Citigroup upgrades Murata's rating, betting on AI servers driving a surge in passive component profits.

According to Mars Finance, on June 30th, Citi upgraded Murata Manufacturing Co., Ltd.'s rating from "Neutral" to "Buy" and significantly raised its target price from ¥3,900 to ¥15,000, citing the reshaping growth curve of the high-end MLCC market driven by demand for AI servers. In a research report released on June 29th, Citi stated that AI servers have significantly higher requirements for the quantity and specifications of multilayer ceramic capacitors (MLCCs) compared to traditional servers. A typical server board uses approximately 2,000 MLCCs, while AI server GPU boards may reach nearly 11,000 by 2026. As AI accelerator power consumption increases and current fluctuations intensify, servers require more high-capacitance, high-reliability components, which is driving up Murata's product portfolio and average selling price. Citi believes Murata is one of the main beneficiaries of this shift. The bank estimates that Murata holds approximately 50% market share in the high-capacitance MLCC market for AI servers, leading Samsung Electro-Mechanics and Taiyo Yuden, with its advantages stemming from yield rates, materials technology, and advanced mass production capabilities. Murata has already added approximately 20% to its regular annual capacity expansion, and Citigroup states that further expansion may be necessary if demand continues to rise. Earnings forecasts have also been significantly revised upwards. Citigroup expects Murata's operating profit to reach 440 billion yen in FY3/27, rising to 630 billion yen in FY3/28, and further increasing to 800 billion yen in FY3/29. The bank stated that the profit growth mainly comes from increased shipments of AI server MLCCs and improved pricing due to the increased proportion of high-specification products. However, Citigroup does not assume that Murata will raise prices across the board for general-purpose MLCCs. The report states that the company is currently more likely to improve profit margins through improvements in its AI server product portfolio rather than actively pushing for industry-wide price increases. However, if the supply and demand for high-end MLCCs remains tight, or competitors raise prices first, Murata may still have additional upside potential. This report shows that AI deals are spreading from GPUs and HBMs to a more granular hardware supply chain. For Murata, the market focus is no longer just on the smartphone and automotive cycles, but on whether AI servers can become a new core driver of profit growth.