Fu Tu News on April 8, Semiconductor Manufacturing International Corporation opened 4.67% higher today.
Semiconductor Manufacturing International Corporation yesterday announced an increase in revenue and gross margin guidelines for the first quarter of 2020 from 0 to 2 per cent month-on-month growth to 6-8 per cent month-on-month growth and from 21 per cent to 23 per cent to 25-27 per cent month-on-month growth.
The expansion of production is beginning to bear fruit, and the supply side is guaranteed.
According to the company's 4Q19 performance meeting, the company expects to expand 30k wpm 8 inch production capacity (Tianjin, Shanghai, Shenzhen) and 20k 12 inch production capacity (Beijing) in 2020. Most of the expansion will contribute revenue to Q3 and Q4. Considering that 4Q19 is close to full production, a small part of the expansion is expected to be reflected in the first quarter, contributing to revenue growth.
FinFET production line has not yet started depreciation, new orders, new prices, improve profitability
(1) according to the definition of company depreciation, the production line output reaches 3k wpm or equipment move in begins depreciation after 6 months. The company's FinFET production capacity is 3k wpm as of 4Q19, and is expected to reach 4k/9k/15k wpm in March / July / December, respectively. Assuming a unit price of US $4200 / piece, the UTR triggered by 4Q19 UTR=20.3%, as of March / July / September is 75%, 33%, 20% respectively.
Considering the climbing progress of the production capacity of the new production line and the time of equipment moving in, we judge that the FinFET production line in the first quarter has not yet begun depreciation. 14nm has contributed $7.69 million in revenue at 4Q19, and the expansion of FinFET's production line is expected to be one of the reasons for the company's improved gross profit margin.
(2) considering that the mature process of the company continues to be fully productive (4Q19 UTR=98.8%), it is expected that some customers are willing to increase prices in order to obtain production capacity in advance to seize the market. The price increase of some orders, which in turn leads to the optimization of product structure, is expected to be the second reason for the improvement in gross profit margin.
The domestic transfer order continues, and the epidemic situation does not change the demand for computing chips in the cloud and base stations.
The demand side is divided into two main lines:
(1) domestic transfer order. Affected by trade frictions and overseas epidemics, some domestic IC design factories are willing to transfer orders to the mainland. Semiconductor Manufacturing International Corporation, as the leader of foundry on the mainland, gives priority to benefit.This main line is aperiodic.
(2) Base stations, servers, 5G mobile phones, IoT and other products are available.For cyclical demand, base stations and cloud computing chips are less adversely affected by the epidemic, while working from home spawned by the epidemic increases the demand for cloud computing and storage.
Although some end-consumer electronics products have suffered short-term setbacks, on the one hand, inventory buffers the impact on upstream contract manufacturing, on the other hand, pure foundry's model allows companies to have more types of order reserves. It is expected that the demand for CIS, PMIC, fingerprint IC, Bluetooth IC and other products in the second half of 2020 is still strong, helping the company to reach the level of "traditional peak season" in the case of production expansion.
Investment advice: the semiconductor industry has been in an upward cycle, Semiconductor Manufacturing International Corporation will restart growth in 2020, while advanced process research and development is progressing smoothly.
For 2020-2022, we expect the company to achieve revenue of $36.87 to $40.78 / 4.454 billion, with net assets of $1.29 per share and $1.35 per share, with a PB of 1.33,1.27,1.20 times current market capitalization, maintaining a "highly recommended" rating.
Risk Tips:
The epidemic may have a small impact on the performance of 2Q20; depreciation after production expansion may put pressure on 2H20 gross profit margin; technological research and development is not as expected; industry competition intensifies; Sino-US trade friction intensifies.
Edit / Edward