SMIC （0981.HK）+13% ~ +15% QoQ for 3Q24 revenues， GM guidance higher than expected； 1Q24 beat on GM； Neutral

Investment Rating - The investment rating for SMIC is Neutral [2][6][8] Core Insights - SMIC is the largest foundry in China, covering technology from 0.35um to 14nm process nodes, with a diverse application range including smartphones and consumer electronics [6] - The company expects a revenue growth of 13% to 15% quarter-over-quarter for Q3 2024, with a gross margin guidance of 18% to 20%, indicating a faster recovery than anticipated [2][6] - Despite positive long-term growth prospects driven by local fabless customers, short-term profit growth is expected to be slow due to industry down-cycle and weak demand from smartphones and consumer electronics, which constitute about 50% of SMIC's revenue [6][7] Revenue and Margin Guidance - Q3 2024 revenue is projected to be between US$2,148 million and US$2,186 million, exceeding previous estimates [2][3] - The gross margin for Q3 2024 is expected to improve to 18% to 20%, compared to 13.9% in Q2 2024, which is higher than previous estimates [2][3] Recent Performance - In Q2 2024, SMIC reported revenues of US$1.9 billion, a 9$87 million, with a net profit of US$165 million, reflecting a 129$21.40, based on a P/E ratio of 26x for 2025 estimates [7][8] - The A-share target price is set at Rmb53.70, reflecting a 273% premium over the H-share target price [7][8]