Investment Rating - The report assigns a "Buy" rating for the company with a target price of HKD 50.00, representing a potential upside of 16.27% from the current price of HKD 43.00 [3][5]. Core Insights - The semiconductor industry is experiencing strong demand from consumer electronics and automotive sectors, despite short-term profit expectations being impacted by unexpected events [3][5]. - The company is positioned as the third-largest wafer foundry globally, with anticipated growth driven by advancements in advanced process technologies and increasing domestic semiconductor production [5][6]. Financial Summary - For the fiscal year ending December 31, 2023, the company reported total revenue of USD 6,321.56 million, a decrease of 13.09% year-over-year, with a projected revenue of USD 8,029.92 million for 2024, reflecting a growth of 27.02% [4][6]. - The net profit attributable to shareholders for 2023 was USD 902.53 million, down 50.35% from the previous year, with a forecasted recovery to USD 851.73 million in 2025, representing a growth of 72.85% [4][6]. - The company’s earnings per share (EPS) for 2023 was USD 0.11, expected to rise to USD 0.15 in 2025 [4][6]. Operational Performance - In Q1 2025, the company achieved revenue of USD 2.25 billion, a year-over-year increase of 28.4%, although slightly below market expectations [5]. - The company’s production capacity increased by 26,000 wafers to 974,000 equivalent 8-inch wafers, with a capacity utilization rate of 89.6%, up 4.1 percentage points from the previous quarter [5]. - The average selling price (ASP) of wafers reached USD 933, showing a year-over-year increase of 2.9% but a quarter-over-quarter decline of 9.0% [5]. Market Dynamics - The report highlights that the demand for AI-related products is expected to grow by over 10% in 2025, with wafer shipments increasing but prices anticipated to decline slightly [5]. - The company is set to expand its production capacity at a steady pace, adding an average of 50,000 pieces of 12-inch wafer monthly, primarily driven by demand from AI, automotive, and IoT products [5][6].

SMIC Q1 2025 Financial Presentation May 2025 Forward-Looking Statements This presentation may contain, in addition to historical information, forward-looking statements. These forward-looking statements are based on SMIC's current assumptions, expectations, beliefs, plans, objectives, and projections about future events or performance. SMIC uses words including but not limited to "believe", "anticipate", "intend", "estimate", "expect", "project", "target", "going forward", "continue", "ought to", "may", "se ...

Financial Data and Key Metrics Changes - Revenue for Q1 2025 was $247 million, representing a sequential increase of 1.8% [4] - Gross margin was 22.5%, down 0.1 percentage points sequentially [4] - Profit from operations was $310 million, and EBITDA was $1.292 billion with an EBITDA margin of 57.5% [4] - Total assets at the end of Q1 were $48 billion, with total cash on hand of $12.7 billion [5] - Total liabilities were $15.7 billion, with total debt at $11.3 billion and a debt to equity ratio of 34.9% [5] - Net cash used in operating activities was $160 million, while net cash used in investing activities was $1.328 billion [5] Business Line Data and Key Metrics Changes - Revenue from wafer sales increased by nearly 5% sequentially, with wafer revenue from 8-inch and 12-inch wafers rising by 182% sequentially [10] - Wafer revenue accounted for 95.2% of total revenue, while other revenue made up 4.8% [9] - Revenue from industrial and automotive sectors increased by over 20% sequentially, contributing to an increase in overall shipments by 15% [11][12] - Revenue from BCD, MCU, and specialty memory platforms increased around 20% sequentially [13] Market Data and Key Metrics Changes - Revenue distribution by region showed China accounting for 84%, the Americas for 13%, and EUAsia for 3% [11] - Revenue from overseas markets increased sequentially, driven by geopolitical changes and demand in commodity products [11] - The automotive business segment saw significant growth due to increased investment and collaboration with industrial chains [12] Company Strategy and Development Direction - The company is focusing on capacity expansion and R&D activities to enhance core competitiveness and corporate value [6][7] - The decision not to distribute profits for 2024 aligns with long-term development needs and shareholder interests [7] - The company plans to maintain a strategic focus on its core business and near-term deliverables [19] Management's Comments on Operating Environment and Future Outlook - The company anticipates a revenue decrease of 4% to 6% sequentially in Q2 2025, with gross margin expected to be between 18% and 20% [15] - Management noted that while there are new market factors, fundamentals remain largely unchanged from Q1 [16] - There are concerns regarding tariff policy changes and their potential impact on future demand [18] - The second half of the year presents both opportunities and challenges, with a focus on enhancing adaptability and risk resilience [19] Other Important Information - The company is in a critical phase of capacity construction and market share expansion, requiring continuous capital expenditures [6] - The capacity utilization rate increased by 4.1 percentage points sequentially to 89.6% [14] Q&A Session Summary Question: What are the expectations for revenue in the second quarter? - The company expects a revenue decrease of 4% to 6% sequentially, with stable shipment units but a decrease in blended ASP [15] Question: How is the company addressing the impact of tariff policies? - Management acknowledged the anxiety in the market due to tariff policy changes and emphasized the need for close attention to these developments [18]

Financial Data and Key Metrics Changes - Revenue for Q1 2025 was $247 million, representing a sequential increase of 1.8% [4] - Gross margin was 22.5%, down 0.1 percentage points sequentially [4] - Profit from operations was $310 million, and EBITDA was $1.292 billion with an EBITDA margin of 57.5% [4] - Total assets at the end of Q1 were $48 billion, with total cash on hand of $12.7 billion [5] - Total liabilities were $15.7 billion, with total debt at $11.3 billion [5] - The debt to equity ratio was 34.9%, and the net debt to equity ratio was negative 4.5% [5] - Net cash used in operating activities was $160 million, while net cash used in investing activities was $1.328 billion [5] Business Line Data and Key Metrics Changes - Revenue from wafer sales accounted for 95.2% of total revenue, with wafer revenue increasing by close to 5% sequentially [9] - Revenue from 8-inch and 12-inch wafers increased by 182% sequentially, driven by customer shipment pull-in due to geopolitical changes and demand rise in commodity products [10] - Revenue from industrial and automotive sectors increased by more than 20% sequentially, contributing to an increase in overall shipments by 15% [11] - Revenue from automotive products increased from 8% to 10% of total revenue, benefiting from major customers' achievements in the automotive field [12] Market Data and Key Metrics Changes - Revenue distribution by region: China accounted for 84%, the Americas 13%, and EUAsia 3% [11] - Revenue from overseas markets increased sequentially, primarily due to geopolitical factors and demand shifts [11] - The company observed a strong demand from BCD, MCU, and specialty memory platforms, with overall revenue from these platforms increasing around 20% sequentially [13] Company Strategy and Development Direction - The company is focusing on capacity expansion and R&D activities to enhance core competitiveness and corporate value [6][7] - The company plans not to distribute profits for 2024 to align with long-term development needs and shareholder interests [7] - The company aims to maintain its leading position in a competitive market through strategic investments [7] Management's Comments on Operating Environment and Future Outlook - The company expects a revenue decrease of 4% to 6% sequentially in Q2 2025, with gross margin guidance between 18% to 20% [15] - Management noted that while there are new market factors, the fundamentals remain largely unchanged compared to Q1 [16] - The company is enhancing its adaptability and risk resilience capabilities in response to market challenges [19] - There is uncertainty regarding the second half of the year, particularly concerning tariff policies and demand fluctuations [18] Other Important Information - The company is in a critical phase of capacity construction and market share expansion, requiring continuous capital expenditures [6] - The capacity utilization rate increased by 4.1 percentage points sequentially to 89.6% [14] Q&A Session Summary Question: What are the expectations for revenue in the second quarter? - The company expects a revenue decrease of 4% to 6% sequentially, with stable shipment units but a decrease in blended ASP [15] Question: How is the company addressing the challenges in the current market? - The company is focusing on cost reduction and efficiency improvements to mitigate the impact of price fluctuations [15]

Financial Performance - In Q1 2025, the company's sales revenue was $2,247.2 million, representing a 1.8% increase from Q4 2024's $2,207.3 million and a 28.4% increase from Q1 2024's $1,750.2 million[5]. - The gross profit for Q1 2025 was $505.9 million, compared to $499.0 million in Q4 2024, marking a 1.4% increase, and a significant 111.0% increase from Q1 2024's $239.7 million[5]. - The gross margin for Q1 2025 was 22.5%, slightly down from 22.6% in Q4 2024, and significantly up from 13.7% in Q1 2024[5]. - Net profit for Q1 2025 was $323.4 million, a 19.4% increase from $270.9 million in Q4 2024, and a 409.2% increase from $63.5 million in Q1 2024[16]. - The company reported a basic and diluted earnings per share of $0.02 for Q1 2025, compared to $0.01 in Q4 2024 and Q1 2024[16]. - Operating profit for Q1 2025 increased to $309,571, up from $214,467 in Q4 2024, marking a growth of 44.3%[31]. - The company reported a net profit of $323,422 for Q1 2025, compared to $270,946 in Q4 2024, an increase of 19.4%[31]. Operating Expenses - Operating expenses in Q1 2025 were $196.3 million, a decrease of 31.0% from $284.5 million in Q4 2024, and a decrease of 17.3% from $237.3 million in Q1 2024[5]. - Research and development expenses for Q1 2025 were $148,899, down 31.3% from $217,035 in Q4 2024[31]. Capacity and Production - Capacity utilization increased to 89.6% in Q1 2025, up by 4.1 percentage points from the previous quarter[7]. - Total wafer sales reached 2,292,153 units in Q1 2025, representing a 15.1% increase from 1,991,761 units in Q4 2024 and a 27.7% increase from 1,794,891 units in Q1 2024[19]. - The capacity utilization rate improved to 89.6% in Q1 2025 from 85.5% in Q4 2024[19]. Cash Flow and Assets - Cash and cash equivalents decreased to $4,587,349 thousand in Q1 2025 from $6,364,189 thousand in Q4 2024[27]. - Net cash used in operating activities for Q1 2025 was $(160,415), a significant decrease from $1,449,842 in Q4 2024[37]. - Total assets as of March 31, 2025, were $47,965,391, down from $49,161,248 at the end of 2024[35]. Liabilities and Equity - Total liabilities decreased to $15,738,909 as of March 31, 2025, from $17,291,590 at the end of 2024[35]. - The company’s total equity increased to $32,226,482 from $31,869,658, reflecting a growth of 1.1%[35]. - The debt-to-equity ratio was 34.9% in Q1 2025, down from 36.4% in Q4 2024[27]. Future Outlook - The company expects Q2 2025 revenue to decline by 4% to 6%, with a gross margin guidance of 18% to 20%[8]. - The company aims to enhance its resilience and risk management capabilities while focusing on its core business in the second half of 2025[8]. Regional Performance - Revenue from the China region accounted for 84.3% in Q1 2025, a decrease from 89.1% in Q4 2024 and an increase from 81.6% in Q1 2024[17]. Other Income - Other income, net for Q1 2025 was $39.7 million, a significant decrease of 71.8% from $140.8 million in Q4 2024[16]. Capital Expenditures - Capital expenditures for Q1 2025 were $1,415.5 million, down from $1,660.1 million in Q4 2024[20].

Financial Performance - The total sales revenue for 2024 reached $8.03 billion, representing a 27% year-over-year increase, marking a historical high[18]. - Total revenue for 2024 reached $8,029.9 million, a 27.0% increase from $6,321.6 million in 2023[35]. - Net profit attributable to shareholders for 2024 was $492.7 million, a decrease of 45.4% compared to $902.5 million in 2023[35]. - EBITDA for 2024 was $4,379.7 million, reflecting a 7.8% increase from $4,064.2 million in 2023[35]. - The company reported a net cash flow from operating activities of $3,175.6 million in 2024, a 5.4% decrease from $3,358.3 million in 2023[35]. - The company’s operating profit for 2024 was $473,900 thousand, an increase from $357,747 thousand in 2023[49]. - The company achieved revenue of $8,029.9 million in the reporting period, representing a year-on-year increase of 27.0%[53]. - The net profit for the year was $729,993 thousand, a decrease of 35% from $1,124,935 thousand in 2023[49]. - The company reported a decrease in the number of wafers shipped to 8,020,798 in 2024 from 5,866,683 in 2023, indicating a significant increase in production capacity[49]. - The average selling price of wafers decreased to $933 from $988 in the previous year[108]. - The cost of sales rose by 29.0% to $6,582.0 million, primarily due to increased wafer sales volume and depreciation[109]. Research and Development - R&D expenses accounted for 9.5% of total revenue in 2024, a decrease of 1.7 percentage points from 11.2% in 2023[37]. - The company incurred a total of $765,279 thousand in research and development expenses for 2024, compared to $707,275 thousand in 2023[49]. - R&D expenses for 2024 amounted to $765.3 million, representing an 8.2% increase from $707.3 million in 2023, with R&D expenses accounting for 9.5% of total revenue, down 1.7 percentage points from the previous year[70]. - The R&D team consists of 1,268 master's degree holders and 498 doctoral degree holders, indicating a strong educational background[74]. - The company is focusing on developing advanced technology platforms, including 28nm ultra-low leakage technology and 55nm high-voltage display technology, with several products already in mass production[71]. - SMIC's R&D efforts are concentrated on various projects, including 0.18-micron embedded storage technology and 8-inch high-voltage display driver technology, with ongoing developments aimed at meeting diverse market needs[71]. Market and Industry Trends - The semiconductor market is showing signs of recovery, with demand from smartphones, personal computers, and consumer electronics gradually stabilizing[53]. - The semiconductor demand in the automotive sector is entering a cyclical adjustment phase, with inventory digestion slowing down[62]. - The global semiconductor industry is characterized by cyclical and growth trends, with short-term supply-demand imbalances not affecting long-term prospects[53]. - The semiconductor industry is experiencing a trend towards localization, with countries actively expanding domestic wafer foundry capacity[161]. - The semiconductor industry in China still faces challenges in matching production capacity and technological capabilities with actual market demand[62]. Strategic Initiatives - The company is focused on innovation-driven growth, enhancing core competitiveness, and achieving multiple historical highs in operational metrics[19]. - Strategic collaborations with leading companies in consumer electronics, automotive, IoT, industrial control, and AI sectors are being deepened[19]. - The company is committed to sustainable development, actively pursuing carbon reduction responsibilities and building green factories[19]. - The company aims to deepen reforms and promote high-quality development in 2025, focusing on strategic planning and innovation in the semiconductor industry[20]. - The company is committed to building a platform-based ecosystem service model, providing one-stop services including design services and IP support[54]. - The company is focusing on optimizing resource allocation and enhancing core business development through strategic asset sales[158]. Risks and Challenges - The company faces risks related to technology upgrades and the potential shortage of skilled technical personnel in the competitive integrated circuit industry[82]. - Supply chain risks are present due to reliance on a limited number of qualified suppliers for critical materials and components, which could lead to production disruptions if shortages or price increases occur[88]. - Financial performance may fluctuate due to macroeconomic conditions, industry cycles, and capital expenditures related to capacity expansion and R&D investments[89]. - The company is exposed to asset impairment risks, particularly if market conditions lead to significant declines in asset values, potentially affecting profitability[90]. - Currency and interest rate fluctuations pose risks, as the company operates in multiple currencies and has floating-rate debt, which could affect financial results[92]. - Intense competition in the global wafer foundry market may hinder the company's ability to maintain market share and profitability if it fails to innovate and expand capacity[95]. - Macroeconomic volatility and geopolitical tensions could negatively affect market demand and supply chain stability, impacting the company's operations[96][97]. Corporate Governance - The company has adopted a corporate governance policy since January 25, 2005, and has complied with all provisions of the corporate governance code applicable to its listings[191]. - The company has established a board of directors with independent non-executive directors to enhance decision-making objectivity[192]. - The company's financial statements have been audited by Ernst & Young[190]. - The company has maintained compliance with relevant laws and regulations that significantly impact its business and operations[190]. Investments and Financial Position - The total assets as of December 31, 2024, were $49,161.2 million, a 2.9% increase from $47,787.3 million in 2023[35]. - The company’s total liabilities stood at $17,291,590 thousand as of December 31, 2024, slightly up from $16,941,696 thousand in 2023[50]. - Total interest-bearing debt amounted to $11,596.0 million, with a net debt position of $(3,367.0) million[138]. - The net debt-to-equity ratio improved to -10.6% in 2024 from -21.1% in 2023, indicating a stronger equity position[148]. - The company has a distributable reserve of USD 6,173.1 million as of December 31, 2024[169]. - The company has no plans to declare or pay any cash dividends on ordinary shares[167].

Investment Rating - The investment rating for the company is "Buy," indicating an expected return exceeding 10% relative to the CSI 300 index over the next six months [12]. Core Views - The report highlights that SMIC is a key player in China's semiconductor industry amidst escalating US-China tech tensions, with the company positioned as the third-largest foundry globally and the largest in mainland China [1][2]. - The semiconductor demand is expected to grow moderately, with advanced processes helping the company navigate through market cycles. The revenue for 2024 is projected to be $8.03 billion, reflecting a 27% year-on-year increase [2][6]. - Significant capital expenditures are planned, with $7.33 billion allocated for 2024, aimed at expanding production capacity and enhancing technological capabilities [3][6]. Financial Data Summary - Revenue projections show a recovery from $6.32 billion in 2023 to $8.03 billion in 2024, with further growth expected to $9.79 billion in 2025 and $11.74 billion in 2026, indicating a compound annual growth rate [6][7]. - The company's net profit is forecasted to rebound from $492.74 million in 2024 to $791.46 million in 2025, and further to $1.14 billion in 2026, reflecting a significant recovery trajectory [7][11]. - The gross margin is expected to improve from 18.03% in 2024 to 25.12% in 2026, indicating better operational efficiency and cost management [7][11]. Capacity and Investment Plans - SMIC plans to maintain a capital expenditure of approximately $7.5 billion in 2025, with ongoing construction of four 12-inch fabs, which will nearly double its production capacity [3][6]. - The company is focusing on advanced process technologies, with the first generation of 14nm FinFET already in mass production and plans for further advancements in the N+2 process node [2][3]. Market Position and Trends - The report emphasizes the strategic importance of SMIC in the context of localizing supply chains due to ongoing geopolitical tensions, which may benefit the company as clients seek to reduce reliance on foreign suppliers [2][3]. - The demand for semiconductors in consumer electronics, particularly driven by AI applications, is expected to create new opportunities for SMIC, with a strong recovery anticipated in the consumer electronics sector [2][3].

Investment Rating - The investment rating for the company is "Buy," indicating an expected return of over 10% relative to the CSI 300 index in the next six months [5][11]. Core Views - The report highlights that SMIC is a key player in the rise of "Chinese chips" amid escalating US-China tech tensions, with stricter scrutiny on semiconductor supply chains starting in 2025 [1][2]. - The semiconductor demand is expected to grow moderately, with advanced processes helping the company navigate through market cycles [2]. - SMIC is making significant capital expenditures to strengthen its position, with plans to double its production capacity over the next few years [3]. Summary by Sections Company Overview - SMIC is the largest foundry in mainland China and the third largest globally, providing a range of technology nodes from 0.35μm to 14nm FinFET [1]. - The company is strategically positioned in the semiconductor industry, especially as the US imposes tighter restrictions on technology access [1]. Financial Performance - In 2024, SMIC's total revenue is projected to reach $8.03 billion, a year-on-year increase of 27% [2][7]. - The company aims to maintain a capital expenditure of approximately $7.5 billion in 2025, with significant investments in expanding its production capacity [3]. Capacity Expansion - SMIC is currently constructing four 12-inch wafer fabs with a combined capacity planning of 340,000 wafers per month, which is nearly double its 2023 capacity [3]. - The company has been increasing its investments in key equipment to support advanced process expansion, particularly in its Shanghai facility [3]. Market Trends - The report notes a recovery in consumer electronics driven by AI innovations, with increased demand for products in the home appliance and 3C sectors expected in 2025 [2]. - The trend of "local for local" sourcing is anticipated to benefit SMIC as overseas sanctions continue [2]. Financial Projections - Revenue projections show a growth trajectory with expected revenues of $9.79 billion in 2025 and $11.74 billion in 2026 [7][8]. - The report anticipates a recovery in net profit margins, with a projected net profit of $791.46 million in 2025, up from $492.74 million in 2024 [8][10].

Investment Rating - The report maintains a "Buy" rating for the company with a target price of HK$60.00, representing a potential upside of 19% from the current price of HK$50.25 [1][9]. Core Insights - The stock price of the company has increased by 74% year-to-date, significantly outperforming the Hang Seng Index, which rose by 16%. This growth is attributed to a revaluation of the company's value driven by multiple factors, including renewed market interest in Chinese-made AI hardware and language models, potential benefits from domestic consumption stimulus policies, and new land use rights for expansion [7][9]. - The management's optimistic outlook includes a target to exceed overall industry growth, particularly benefiting from the recovery in demand for consumer electronics and automotive sectors. The company is well-positioned to capitalize on the trend of migrating to 28nm process technology [8][9]. Summary by Sections Investment Rating - The investment rating remains "Buy" with a target price adjustment from HK$21.30 to HK$60.00, reflecting a 182% increase in target price [2][9]. Financial Performance - Revenue estimates for 2025 have been increased to US$9,693 million, a 4% rise from previous estimates, with net profit projections raised by 69% to US$927 million [11][10]. - The expected EPS for 2025 is now US$0.12, up from US$0.07, indicating a 70% increase [2][11]. Market Position and Trends - The company is expected to benefit from favorable domestic policies and a recovering demand environment, particularly in the consumer electronics sector, with anticipated growth in smartphone, PC, and tablet demand [7][8]. - The report highlights the company's strategic advantage in the semiconductor industry, particularly in the context of local production and technological advancements [9][10]. Valuation - The valuation approach has shifted to a price-to-book (P/B) ratio of 2.85, which is a significant increase from the previous year's P/B of 1.05, indicating a strong market sentiment towards the company's future prospects [9][13].

Investment Rating - The report maintains a "Buy" rating for the company, indicating a positive outlook for its stock performance relative to market indices [6]. Core Insights - The company, SMIC, has shown steady growth in its 12-inch wafer business, with quarterly revenue surpassing $2 billion for the first time. The revenue for Q4 2024 is projected to be $2.207 billion, reflecting a year-on-year increase of 31.5% and a quarter-on-quarter increase of 1.7% [3][4]. - The gross margin for Q4 2024 is expected to exceed guidance, reaching 22.6%, which is higher than the previously indicated range of 18%-20%. This improvement is attributed to favorable product mix and structure [3][4]. - The company anticipates a strong demand for replenishment in the first half of 2025, driven by domestic substitution projects entering mass production and government subsidy policies [3][4]. Financial Summary - **Revenue Projections**: The total revenue for 2023 is estimated at $6.322 billion, with projections of $8.030 billion in 2024, $9.678 billion in 2025, and $11.589 billion in 2026, showing a compound annual growth rate (CAGR) of approximately 20% from 2024 to 2026 [3][4]. - **Net Profit**: The net profit attributable to shareholders is projected to decline to $493 million in 2024, before recovering to $774 million in 2025 and $1.027 billion in 2026 [3][4]. - **Gross Margin**: The gross margin is expected to be 19.26% in 2023, decreasing to 18.03% in 2024, before stabilizing at 19.26% in 2025 and increasing to 20.96% in 2026 [3][4]. Operational Insights - The company’s 8-inch wafer monthly production capacity is projected to be 948,000 wafers in Q4 2024, with a capacity utilization rate of 85.5% [3][4]. - The average selling price (ASP) for products is expected to increase by 6% quarter-on-quarter in Q4 2024, although a decline in ASP is anticipated in the second half of 2025 due to increased market supply [3][4]. - Capital expenditures for 2024 are estimated at $7.326 billion, with depreciation expenses expected to rise by approximately 20% [3][4].