2025-09-23 02:37Summary of SMIC (0981.HK) Conference Call Company Overview - Company: SMIC (Semiconductor Manufacturing International Corporation) - Ticker: 0981.HK - Industry: Semiconductor Foundry Key Points Industry Dynamics - AI Chip Demand: There is a significant increase in demand for AI-related semiconductors, driven by ongoing AI innovations and the expansion of cloud infrastructure in China. For instance, China Mobile has made a procurement of over Rmb1.7 billion for AI inferencing servers, indicating a positive outlook for AI chip demand [1][2] - Domestic Solutions: Domestic AI chip suppliers, including Huawei and Cambricon, are developing advanced solutions, which is expected to further boost the demand for semiconductors in China [1][2] Company Performance and Outlook - Revenue Growth: SMIC's revenue is projected to grow from $8.03 billion in 2024 to $19.88 billion by 2029, reflecting a compound annual growth rate (CAGR) of approximately 19% [9][20] - Earnings Revision: The earnings estimates for 2025-2027 remain largely unchanged, while EPS estimates for 2028-2029 have been increased by 1% and 2% respectively due to higher revenues and gross margins [3] - Gross Margin Improvement: Gross margins are expected to improve from 26.5% in 2028 to 28.5% in 2029, supported by better utilization rates [3][20] Financial Metrics - Earnings Estimates: - 2025E Revenue: $9.24 billion - 2026E Revenue: $11.22 billion - 2027E Revenue: $13.75 billion - 2028E Revenue: $16.67 billion - 2029E Revenue: $19.88 billion [9][20] - Net Income: Expected to rise from $768 million in 2025 to $3.13 billion by 2029 [20] - EPS Growth: EPS is projected to increase from $0.10 in 2025 to $0.39 in 2029 [9][20] Valuation - Target Price: The 12-month target price for SMIC's H-share is raised to HK$83.5, based on a P/E multiple of 45.2x for 2028E [9][23] - A-Share Valuation: The target price for SMIC's A-share is set at Rmb182.8, reflecting a 238% premium over the H-share [10][23] Risks - Demand Fluctuations: Potential risks include weaker-than-expected demand in smartphones and consumer electronics, which could impact revenue [24] - Supply Chain Issues: Access to certain equipment and materials may be restricted due to the company's listing on the US BIS Entity List [25] Investment Thesis - Long-term Growth: SMIC is positioned to benefit from the growing demand from local fabless customers and is expected to see a gradual recovery in margins. The shares are considered attractively valued compared to historical averages [26] Conclusion - Recommendation: Maintain a Buy rating on SMIC, supported by strong long-term growth prospects in the semiconductor industry, particularly in AI applications [1][26]