SMIC(SH:688981) 海豚投研·2025-06-20 11:46Core Viewpoint - The article discusses the valuation discrepancies between SMIC's A-shares and H-shares, highlighting the contrasting perspectives of domestic and foreign investors regarding the company's potential and investment returns [1][39]. Group 1: Investment Characteristics - SMIC is viewed as a critical asset in China's semiconductor industry, with significant production capacity and a leading position in mature process technology [5][40]. - The company has experienced substantial revenue growth, with a projected revenue of $8 billion in 2024, reflecting a compound annual growth rate of 16% over six years [9]. - However, capital expenditures have also surged, reaching $7.3 billion in 2024, indicating that over 90% of revenue is reinvested into capital [10][19]. Group 2: Financing and Cash Flow - SMIC's financing sources include equity financing, debt financing, and non-controlling shareholder investments, with each contributing approximately equally over the past six years [21]. - The company raised $7.5 billion through its IPO in 2020 and has accumulated $9.4 billion in net borrowings over seven years [23][24]. - Recent trends show a decline in state-owned capital injections, with only $280 million received in 2024, significantly lower than previous years [30]. Group 3: Valuation Discrepancies - The valuation gap between SMIC's A-shares and H-shares is attributed to differing investment philosophies, with domestic investors viewing it as a strategic asset while foreign investors see it as less unique compared to competitors like TSMC [39][41]. - Domestic investors are more likely to adopt a long-term perspective, while foreign investors focus on short-term returns and may not be willing to endure the associated risks [41][42]. - The article suggests that SMIC's valuation is likely to remain structurally different due to these contrasting views, making it challenging to reconcile the price differences in the market [43]. Group 4: Investment Opportunities - SMIC is characterized as a heavy asset business with cyclical performance, and its valuation is expected to fluctuate between 1-2 times price-to-book (PB) ratio based on market conditions [50]. - The company is positioned as a "growth reserve," with potential for higher PB elasticity when trading below 1 PB, but risks of significant declines when trading above 2 PB without fundamental breakthroughs [54]. - Investors are encouraged to consider their investment horizon and the nature of returns they seek, especially given the cyclical nature of the semiconductor industry [55].