Jinwu Financial News | According to CCB International Development Research Report, SMIC (00981) performed better than expected in the first quarter. Revenue increased 4.3% month-on-month to reach US$1.75 billion (up 19.7% year over year), exceeding market expectations and exceeding the 0-2% month-on-month growth limit in the guidelines. The gross margin was 13.7%, down from the same period last year and the previous quarter, but higher than the 9-11% guidance range given. Net profit decreased 69% year over year and 59% month on month to USD 72 million, better than market expectations. Wafer shipments in the first quarter increased 7% month-on-month, but the average selling price fell 13%.
According to the bank, the performance of the automotive and industrial sectors is still weak due to inventory adjustments and weakening demand. It is expected that in the second quarter of 2024, in addition to a continued rebound in the consumer market, SMIC will also see an increase in orders for microcontrollers (MCU) and low-power integrated circuits. Furthermore, Chinese smartphone original equipment manufacturers (OEMs) have higher sales targets this year than last year, which may also drive shipments.
The bank continued that the increase in depreciation and amortization expenses brought about by the production capacity of the new fab will continue to put pressure on gross margins. Revenue forecasts for 2024 to 2026 were raised by 0-3% due to increased utilization rates driven by a recovery in demand. The bank maintained its outperforming market rating, keeping the target price of H shares unchanged at HK$22.50 and the target price of A shares of RMB 55.00.