下调至“持有”评级；下调目标价至14.00港元

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$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]