Investment Rating - The report maintains a "Buy" rating for the company with a target price of HK$32.00, down from the previous HK$35.00 [1][18]. Core Insights - The company is expected to achieve over 30% profit growth in 2024, supported by a rich portfolio of TV series, movies, and games [1][2]. - Revenue for 2024 is projected at RMB 7.59 billion, reflecting an 8.2% year-on-year increase [3][15]. - The adjusted net profit for 2024 is estimated at RMB 1.48 billion, a 30.6% increase compared to the previous year [15][18]. Financial Performance Summary - The company reported a revenue of RMB 3.73 billion for 2H23, a 5% year-on-year increase, with adjusted net profit at RMB 527 million, down 23% year-on-year [1][13]. - Online reading platform revenue decreased by 7% to RMB 1.91 billion, while copyright operation revenue increased by 25% to RMB 1.78 billion [1][13]. - The adjusted net profit margin for 2H23 was 14.1%, down from 19.3% in the previous year [13][15]. Revenue Breakdown - Online business revenue is expected to be RMB 3.96 billion in 2024, while copyright operations are projected at RMB 3.54 billion [15][18]. - The company plans to release 6 to 7 TV series in 2024, including major titles that have already shown strong box office performance [2][18]. Valuation and Target Price - The target price is derived from a sum-of-the-parts (SOTP) valuation, with contributions from various segments: RMB 8.00 for non-New Classics copyright operations, RMB 12.00 for New Classics, and RMB 12.00 for online business [18][20]. - The valuation reflects a consistent P/E ratio of 20x for 2024 across all segments, aligning with industry averages [18][20].

Investment Rating - The report downgrades SMIC-H (981 HK) to a "Hold" rating from a previous "Buy" rating [1][4][10] - The target price is revised downward to HK$14.00 from HK$18.00, reflecting a 22% decrease [1][4][10] Core Views - SMIC's focus on capacity expansion over profitability is expected to result in a mid-term ROE in the low single digits [4][5][10] - The company's advanced node business (N28 and beyond) is conducted through joint ventures, limiting its ability to capture full profits [4][5][10] - The report highlights that SMIC's expansion plans are progressing steadily, with a focus on N22-28 nodes to avoid competition in more mature nodes [5] - The report notes that SMIC's capital expenditure for 2024 is expected to remain flat at $7.47 billion, consistent with 2023 levels [4][5] Financial Summary - Revenue for 2024E is projected at $6.885 billion, with a slight increase to $7.937 billion in 2025E and $8.737 billion in 2026E [6] - EPS for 2024E is forecasted at $0.04, increasing to $0.06 in 2025E and $0.06 in 2026E [1][6] - The P/E ratio for 2024E is 47.6x, decreasing to 33.8x in 2025E and 30.6x in 2026E [6] - The P/B ratio for 2024E is 0.7x, remaining consistent through 2026E [6] Industry Context - The report suggests that the oversupply of mature node capacity in China is largely confined to the domestic market due to supply chain decoupling from the rest of the world [4] - Overseas foundries like GlobalFoundries have adopted a cautious approach to capacity expansion, with capital expenditure declining by 41% YoY in 2023 and expected to drop further in 2024 [4] - In contrast, Chinese foundries like SMIC and Hua Hong are aggressively expanding capacity, with Hua Hong planning to complete a second 12-inch fab within three years [4] Valuation and Risks - The new target price of HK$14.00 is based on a 0.7x 2024E P/B ratio, down from 0.9x, reflecting lower profitability and return expectations [10] - The report highlights that SMIC's future opportunities are increasingly limited to the domestic market, with the "China capacity for China demand" strategy potentially leading to domestic oversupply [4]