SMIC(688981) 天风证券·2025-01-05 07:54Investment Rating - The report initiates coverage on SMIC with a "Buy" rating, setting a target price of 133.59 yuan for its A-shares in 2025 [5][44] Core Views - SMIC is positioned as the leading wafer foundry in mainland China, benefiting from the AI-driven semiconductor cycle [1] - The company is expected to capitalize on the AI wave, with demand for advanced and mature process nodes driving growth [2][3] - SMIC's capacity utilization rate bottomed out in 1Q23 and reached 90.4% in 3Q24, indicating improving supply-demand dynamics [2][23] - The company's historical stock performance shows a positive correlation with the semiconductor cycle, suggesting potential upside as the cycle recovers [2][26] Key Drivers AI-Driven Semiconductor Cycle - The global semiconductor cycle is in an upward trend, driven by AI demand, with global semiconductor sales showing 12 consecutive months of YoY growth as of October 2024 [2][20] - AI-driven demand for cloud and terminal chips is expected to be a major factor in the current semiconductor cycle recovery [2][20] Advanced Process Node Demand - AI is driving demand for advanced process nodes, with SMIC well-positioned to benefit due to its leadership in mainland China's advanced process manufacturing [3][30] - SMIC has developed N+1 and N+2 processes, giving it strong pricing power in the domestic market [3][30] - The company is expected to benefit from the localization of AI chip demand and the push for domestic substitution [3][30] Mature Process Node Demand - Mature process nodes are expected to benefit from consumer recovery and accelerated domestic substitution [3] - China's semiconductor capacity increased by 365% from 2012 to 2022, leading globally, driven by strategic expansion and supply chain security concerns [35] - AI-driven innovation is expected to boost demand for traditional products like smartphones and PCs, as well as new categories like AI glasses and headphones [35][38] Financial Projections - Revenue is projected to grow to 56.7 billion yuan in 2024, 65.7 billion yuan in 2025, and 73.5 billion yuan in 2026 [4][44] - Net profit attributable to shareholders is expected to reach 4.02 billion yuan in 2024, 5.96 billion yuan in 2025, and 7.30 billion yuan in 2026 [4][44] - The smartphone segment is expected to be a key growth driver, with revenue growth of 40% in 2024, 25% in 2025, and 15% in 2026 [41][43] Valuation - SMIC is valued using a PB multiple, with a target PB of 7.05x for A-shares in 2025, reflecting its leadership in advanced process nodes in mainland China [44] - The A/H share premium is expected to remain stable at around 3.0x, consistent with historical trends [44][47] Historical Performance - SMIC's stock performance has been sensitive to US-China relations and the semiconductor cycle, with significant volatility during periods of US sanctions [15][16] - The company's capacity utilization has historically shown a strong correlation with its stock price, with periods of high utilization leading to better stock performance [26][27][28]