2025-09-16 02:03Summary of SMIC (0981.HK) Conference Call Company Overview - Company: Semiconductor Manufacturing International Corporation (SMIC) - Ticker: 0981.HK - Industry: Semiconductor Foundry Key Points Industry Demand and Growth - Rising demand from Chinese IC fabless companies, particularly in consumer electronics and automotive sectors, is a significant driver for SMIC's growth [1][4] - The "China for China" demand trend favors leading foundries like SMIC, enhancing its market position [1][4] - The emergence of AI is creating new opportunities for edge AI computing chips, contributing to long-term growth prospects for SMIC [1][4] Financial Performance and Projections - SMIC is expected to achieve a 21% CAGR in revenue from 2025 to 2029, with gross margins recovering from 21% in 2025E to 28% in 2029E [4][10] - Revenue guidance for 3Q25 is projected to rise by 5% to 7% QoQ, with gross margin guidance of 18% to 20% [1] - The company anticipates a gradual recovery in margins due to improved utilization rates and a focus on high-margin products [31] Earnings Revision - Earnings estimates for 2028-29E have been raised by 3% and 7% respectively, reflecting higher revenue and gross margin expectations [10] - The 2028-29E revenues are adjusted upwards by 0.4% and 2%, driven by stronger growth from Chinese IC designers and AI trends [10] Valuation and Price Target - The 12-month target price for SMIC's H-share is set at HK$73.1, based on a 40x 2028E P/E multiple, discounted back to 2026E with a cost of equity (COE) of 15% [12][28] - The A-share target price is set at Rmb160.1, reflecting a 238% premium over the H-share [13][28] Risks - Potential risks include weaker-than-expected demand in smartphones and consumer electronics [29] - Slower product diversification and capacity expansions could hinder growth [30] - Access to certain equipment and materials may be restricted due to the company's listing on the US BIS Entity List [30] Investment Thesis - SMIC is positioned as the largest foundry in China, covering a wide range of technology nodes from 0.35um to 14nm [31] - The company is expected to maintain a solid growth profile, with shares currently trading below historical average P/E ratios, indicating attractive valuation [31] Financial Metrics - Projected revenues for 2025E are $9.24 billion, with net income expected to reach $768 million [11][25] - Gross margin is projected to improve to 20.7% in 2025E and further to 28.2% by 2029E [11][25] Conclusion - SMIC is well-positioned for long-term growth driven by domestic demand and emerging AI opportunities, with a positive outlook on revenue and margin recovery. The current valuation presents an attractive investment opportunity despite potential risks in the market.