Everbright Securities adjusted the net income attributable to the parent company of Semiconductor Manufacturing International Corporation (00981) for 24-25 years to USD 0.679/0.911 billion.
According to the research report released by Everbright Securities on the Intelligent Wealth APP, it maintains the "buy" rating of Semiconductor Manufacturing International Corporation (00981). It is optimistic about the improvement of subsequent production capacity utilization rate and wafer ASP due to the recovery of downstream demand, but it is considered that capacity release will increase depreciation and amortization. The income of the parent company for 24-25 years was adjusted to 0.679/0.911 billion US dollars(compared with the last forecast -25%/-13%). The 26-year net income forecast of 1.181 billion US dollars was added, with the corresponding year-on-year growth rate of -25%/+34%/+30%. The share price also benefits from the domestic substitution opportunity.
The main points of view of Everbright Securities are as follows:
Outstanding performance in the second quarter of 2024.
In the second quarter of 2024, the company achieved revenue of USD 1.901 billion, a year-on-year increase of 21.8% and a quarter-on-quarter increase of 8.6%, exceeding the upper limit of the company's revenue guidance for a quarter-on-quarter increase of 5%-7%, mainly due to the quarter-on-quarter increase in wafer shipments of 18%, offsetting the impact of a quarter-on-quarter decline of 8% in ASP due to changes in product mix. In terms of profitability, the company achieved a gross margin of 13.9%, exceeding the upper limit of the company's gross margin guidance range of 9%-11%, up 0.2pct quarter-on-quarter and down 6.4pct year-on-year. Net income attributable to the parent company was USD 0.165 billion, a year-on-year decrease of 59%, a quarter-on-quarter increase of 129%, and a corresponding quarter-on-quarter increase in net margin of 5pct to 9%. The company's guidance for the third quarter of 2024 is strong and exceeds expectations. The company's guidance for the third quarter is a quarter-on-quarter growth of 13%-15%, corresponding to USD 2.15-2.19 billion, which is more than 16% higher than the market expectation of USD 1.87 billion, and a gross margin guidance of 18%-20%, which is about 7pct higher than the market expectation of 12.08%. Strong performance is due to the acceleration of domestic demand, the improvement of production capacity utilization rate, and the rise in wafer ASP. The guidance for the company's full-year revenue growth rate in 2024 will exceed the industry average, and the revenue scale in the second half of the year is expected to exceed that in the first half of the year.
The downstream demand of consumer electronics and smartphones has rebounded, and the demand for wafer OEMs has risen.
1) Application: In the second quarter of 2024, benefited from the recovery of demand for consumer electronics and smartphones. Smartphones, computers and tablets, consumer electronics, and other revenues accounted for 32%, 13%, 36% and 19%, respectively. Among them, consumer electronics and smartphones have become the main growth drivers, driving strong demand for BCD platform, RF/CMOS and other chip products. 2) Size: The revenue of 8-inch and 12-inch wafers accounted for 26.4% and 73.6% respectively in the second quarter of 2024. The proportion of 8-inch wafers increased by 1.1pct year-on-year and 2pct quarter-on-quarter due to the rebound of 8-inch wafer utilization rate. 3) Region: benefited from the wave of domestic substitution, China accounted for 80% of the revenue, the United States accounted for 16%, and Eurasia accounted for 4%.
The improvement of production capacity utilization rate, the increase of wafer prices, and the increase of 12-inch wafer shipment proportion are expected to drive continuous enhancement of profit-making capability.
The guidance for the third quarter of 2024 exceeded expectations. 1) Wafer shipment and production capacity utilization rate: The production capacity utilization rate in the second quarter of 2024 was 85%, up 4pct quarter-on-quarter, due to the recovery of 8-inch wafer utilization rate and the close to full load of 12-inch production capacity. The company's expansion plan continued to advance, and the monthly production capacity of 8-inch wafers in the second quarter of 2024 increased to 0.837 million pieces, a quarter-on-quarter increase of 3% from 0.815 million pieces in the first quarter of 2024, and the company guided that the monthly production capacity of 12-inch wafers at the end of 2024 will increase by 0.06 million pieces compared to the end of 2023. In terms of shipments, the company guided that the third quarter will be flat with the second quarter, and customer inventory replenishment ending in the fourth quarter will be ordered on demand, which may cause a slight quarter-on-quarter decline in shipments in the fourth quarter. 2) ASP: The rise in ASP will be the main reason for the third-quarter guidance to exceed expectations, and the trend of rising prices will last at least until the fourth quarter of 2024. ① Wafer supply is in short supply, and various product prices have shown an upward trend since the second quarter of 2024; ② The proportion of 12-inch wafer shipments increased in the third quarter of 2024, and the overall ASP increased due to improvements in product mix. Looking ahead to the future, the recovery of downstream demand supports the utilization rate of production capacity and the shipment of wafers, and the rise in ASP is expected to continue at least until the fourth quarter of 2024, driving a steady increase in profitability.
Risk Warning: Tightening of US regulations, weak downstream demand, increased industry competition, and technological progress falling short of expectations.