China Post Securities·2025-12-16 13:33Investment Rating - The report maintains a "Buy" rating for the company, indicating an expected relative increase in stock price of over 20% compared to the benchmark index within the next six months [5][13]. Core Insights - The company is experiencing sustained demand driven by local production needs, with a high capacity utilization rate of 95.8% as of Q3 2025. Revenue from the Chinese market has increased by 11% quarter-on-quarter, reflecting a shift in the supply chain and growing domestic demand [3][4]. - The company anticipates stable capital expenditures for the year, with a projected monthly capacity expansion of 50,000 12-inch wafers. Total capital expenditures for the year are expected to be around $7.5 billion, with 80% allocated for equipment purchases [4]. - Revenue forecasts for 2025, 2026, and 2027 are projected at 671 billion, 783 billion, and 901 billion yuan respectively, with net profits of 50.58 billion, 62.59 billion, and 75.34 billion yuan [5][7]. Financial Projections - The company is expected to achieve revenues of 57.8 billion yuan in 2024, growing to 67.1 billion yuan in 2025, with a growth rate of 27.72% in 2024 and 16.06% in 2025 [7][12]. - The projected EBITDA for 2025 is approximately 42.1 billion yuan, with a net profit margin expected to improve from 6.4% in 2024 to 7.5% in 2025 [7][12]. - The earnings per share (EPS) is forecasted to increase from 0.46 yuan in 2024 to 0.63 yuan in 2025, reflecting the company's growth trajectory [7][12]. Relative Valuation - The company is positioned as a leading integrated circuit foundry in China, with a competitive edge in manufacturing capabilities and service offerings. It aims to enhance its business synergy through strategic acquisitions and maintain a high capacity utilization rate [10][11]. - The report compares the company's price-to-book (P/B) ratio of 5.98 with TSMC's P/B of 9.09, indicating a favorable valuation relative to its peers [11]. Market Position - The company is recognized as a benchmark in the domestic foundry industry, particularly in advanced process technology, which is crucial given the current high demand for high-end chips in the market [11]. - The anticipated growth in artificial intelligence and local production demands is expected to further solidify the company's market position and competitive advantages [11].