Ge Long Hui·2025-08-12 03:12Group 1 - The core viewpoint of the article is that SMIC's second-quarter performance exceeded expectations, with a quarterly revenue decline of 1.7% and a gross margin of 20.4%, which is higher than the bank's forecast and the upper limit of guidance [1] - The main driver for the better-than-expected performance is attributed to the growth in 8-inch products [1] - Management has guided for a revenue recovery in the third quarter, expecting a sequential growth of 5% to 7%, while maintaining the gross margin guidance of 18% to 20% consistent with previous second-quarter guidance [1] Group 2 - Management noted that customers may have built up inventory in advance during the first three quarters, and anticipates a slowdown in urgent orders and restocking demand in the fourth quarter [1] - Despite this, the company's capacity remains in high demand until at least October, and management will continue to gather customer feedback for assessment [1] - The bank estimates that SMIC added 19,000 12-inch wafer production capacity in the first half of the year and predicts an additional 11,000 in the third quarter, with average selling prices higher than the second quarter but still slightly lower than the first quarter [1] Group 3 - The bank forecasts SMIC's revenues to reach $9.29 billion and $11 billion in 2025 and 2026, respectively, with gross margins of 20.5% and 21% [1] - The bank maintains the view that the current valuation of the company adequately reflects its fundamentals, keeping a "neutral" rating [1] - The target price for H-shares has been slightly raised from HKD 45 to HKD 47, corresponding to 2.1 times the 2026 price-to-book ratio [1]