Investment Rating - The report upgrades SMIC's H/A shares to Buy/Buy from Reduce/Hold, with target prices raised to HKD64.00/RMB148.00 from HKD35.00/RMB92.00, implying upside of approximately 46%/73% [4][8]. Core Insights - SMIC is positioned to benefit from the localization trend in China, emerging as a key player in the semiconductor industry despite facing near-term ASP headwinds due to specific equipment yield issues [1][3]. - The company is expected to maintain margin stability in advanced nodes through a balance of pricing power and yield improvements, with an anticipated ASP premium of 57% under conservative yield assumptions [2][49]. - SMIC's market share in the China Foundry Total Addressable Market (TAM) is projected to grow from 25% in 2024, supported by a 13% capacity expansion from Q2 2024 to Q4 2024 [3][41]. Summary by Sections Financial Performance - Revenue projections for SMIC are estimated at USD 8,030 million for 2024, increasing to USD 13,210 million by 2027, reflecting a year-on-year growth of 27% in 2024 and 15% in 2025 [9][10]. - The net profit is expected to rise from USD 493 million in 2024 to USD 1,918 million in 2027, with EPS estimates increasing from USD 0.06 to USD 0.25 over the same period [9][10]. Valuation Metrics - The report raises the target price-to-book (P/B) multiples for SMIC to 2.9x/7.2x, reflecting a premium due to its strategic positioning and expansion into advanced nodes [4][64]. - The expected EV/sales ratio is projected to decrease from 5.9 in 2024 to 3.5 by 2027, indicating improving valuation as revenue grows [11]. Market Dynamics - The ongoing geopolitical tensions are expected to reinforce China's push for self-sufficiency, benefiting SMIC as it becomes the preferred foundry in China [21][39]. - The report highlights that despite short-term ASP declines, SMIC is likely to emerge as a major beneficiary of the localization trend, with expectations for improved ASP conditions in the second half of 2025 [38][41]. Capacity and Utilization - SMIC's capacity in advanced nodes is projected to reach 25K-30K wafers per month by the end of 2025, with utilization rates expected to improve from 86% in FY24 to 91% in FY25 [49][50]. - The company is anticipated to maintain a high utilization rate compared to peers, reaching full capacity by the first half of 2026 [22][41].

Investment Rating - The report upgrades Broadcom Inc to a Buy from Hold with a target price of USD 400, up from USD 240, indicating an implied upside of approximately 58% from the current share price of USD 253.77 [5][7][12]. Core Insights - The report expresses a positive outlook on Broadcom driven by improved visibility into ASIC revenues, which are expected to significantly exceed market expectations due to better project visibility and pricing power [2][3][12]. - Concerns regarding potential share loss in the wireless segment and a slowdown in VMware have been toned down, with revised estimates aligning more closely with consensus [4][54][57]. ASIC Revenue Potential - ASIC revenue is projected to ramp up significantly starting FY26, with expectations of strong demand from existing customers and the addition of new customers, leading to a compound annual growth rate (CAGR) of 96% from 2023 to 2027 [21][51]. - The report revises ASIC revenue estimates for FY26 and FY27 to USD 28.4 billion and USD 42.8 billion, respectively, which are 42% and 69% higher than consensus estimates [3][31][36]. - The anticipated increase in ASIC blended average selling prices (ASPs) is expected to be 92% year-over-year in FY26 and 25% in FY27, driven by a shift towards larger die sizes and improved memory specifications [27][31][39]. Wireless Segment and VMware - The report revises wireless revenue estimates for FY26 and FY27 to USD 6.8 billion and USD 6.3 billion, respectively, reflecting a more gradual share loss from Apple than previously expected [4][56]. - VMware's revenue growth is expected to remain stable for another 18 months as customers transition to subscription models, mitigating concerns about an imminent slowdown [4][57]. Financial Projections - Broadcom's projected earnings per share (EPS) for FY27 is now estimated at USD 12.54, which is 32% above consensus estimates [5][8][12]. - The report highlights a significant increase in revenue and EBITDA projections for FY26 and FY27, with revenue expected to reach USD 82.6 billion and USD 102.7 billion, respectively [13][14].