SMIC Quarterly and Annual Performance Overview
Key Highlights:
- Revenue: SMIC reported a robust second quarter (2Q24) with a 22% year-over-year (YoY) and 9% quarter-over-quarter (QoQ) increase in revenue to US$1,901 million, beating previous guidance and consensus.
- Gross Margin: Gross margin improved by 0.2 percentage points (ppts) QoQ to 13.9%, primarily due to higher utilization rates (UTR).
- Operating Margin: Operating margin increased by 4.4 ppts QoQ to 4.6%.
- Net Income: Net income reached US$165 million, significantly exceeding expectations by 194% and 116% over BOCI estimates and consensus.
- Capacity: Monthly capacity grew to 837,000 8-inch equivalent wafers in 2Q24, slightly below the estimated 848,000.
- Utilization: UTR increased by 4.4 ppts QoQ to 85.2%, driven by urgent orders from mobile and IoT products.
- Raw Wafer ASP: Raw wafer ASP decreased to US$836 per 8-inch wafer, mainly due to a higher shipment mix of 8-inch wafers.
Third Quarter (3Q24) Guidance:
- Revenue: Expected to increase by 13-15% QoQ, translating to a 34% YoY growth.
- Gross Margin: Forecasted to range between 18% to 20%.
Management Outlook for 2024:
- Revenue Growth: Targeting growth rates not lower than the industry average of comparable peers. Second half (2H24) revenue is expected to exceed first half (1H24) with overall industry recovery, excluding automotive and industrial sectors.
- ASP Increase: Anticipated gradual increase driven by:
- Long-term demand from domestic customers and new products.
- New capacity for high-value-added products.
- Capacity Expansion: Plans to increase total 12-inch capacity by 60,000 wafers per month in 2024, surpassing the previous annual addition rate of 30,000 to 50,000 wafers per month.
Valuation and Target Price:
- Target Price: Raised to HK$23.0 from HK$22.0, based on an unchanged 1.1x price-to-book (P/B) ratio.
- Target Price Basis: Based on a forward price-to-book (P/B) of 1.1x, roughly in line with the five-year average multiple.
- Target Price Representation: Represents a 43x, 30x, and 20x multiple for 2024E, 2025E, and 2026E earnings per share (EPS), respectively.
Key Data Table:
| 2024E/25E/26E |
Revenue (US$ m) |
EPS (US$) |
P/E (x) |
P/B (x) |
| 2024E |
7,975 |
0.15 |
43 |
0.8 |
| 2025E |
9,662 |
0.11 |
30 |
0.8 |
| 2026E |
10,991 |
0.14 |
20 |
0.8 |
Conclusion:
SMIC's strong performance in the second quarter, combined with robust guidance for the third quarter, supports the company's resilience and potential for continued growth. The strategic focus on capacity expansion and addressing market dynamics makes SMIC a compelling investment opportunity.
