According to the report, the company's revenue and gross margin for the first quarter were better than the guidelines, and the second quarter guidelines exceeded expectations. The company's 21Q1 revenue was US$1.104 billion, up 12.5% month-on-month, up 22% year on year, better than company guidelines (guidelines were up 7% to 9%); gross profit margin was 22.66%, up 4.65pcts month on month, better than company guidelines (17% ~ 19%); in the context of industry shortages, the company's demand was strong and operational efficiency improved, and capacity utilization reached 98.7%, up 3.2 pcts; average wafer sales price increased 4.7% to 646 US dollars. The company guided 21Q2 revenue to increase 17% to 19% month-on-month, the median revenue reached 1.3 billion US dollars, and the gross margin guideline was 25% to 27%, all exceeding previous market expectations.

The bank said that the company's 8-inch production expansion drove a 10% month-on-month increase in revenue, and a 20% month-on-month increase in revenue due to the rise in 12-inch ASP. Looking at the revenue split, the company disclosed an increase in 8-inch production capacity equivalent to 20,000 pieces/month in the first quarter, mainly due to the expansion of the production capacity of 8-inch fab factories. Assuming that the new production capacity of 20,000 pieces/month in the current quarter is 8-inch wafers, the bank estimates that 8-inch production capacity increased by about 8.5% month-on-month in the first quarter, ASP increased by about 1.2%, revenue increased by about 9.8%; 12-inch revenue increased by about 20%, mainly due to an increase in ASP.

The main 8-inch products include PMIC and other products for major customers in North America. The bank believes that due to long-term cooperation and relative concentration of customers, the price increase may be relatively limited; on the 12-inch side, ASP growth may come from various factors such as product mix adjustments and unit price increases. 28/14nm revenue, which has a high unit price of wafers, increased 59% month-on-month. Under the introduction of various NTO (new film) projects, production capacity utilization improved markedly. 40/45nm revenue increased 27% month-on-month, and 55/65nm revenue increased 11.2% month-on-month.

CITIC said that capital expenditure in the first quarter was subject to licensing restrictions. It is expected that subsequent expansion of production will advance rapidly, and revenue is expected to continue to increase month-on-month throughout the year. In terms of capital expenditure, the company's 21Q1 capital expenditure was US$534 million, down from US$1,333 million in the previous quarter. The company maintains an annual capital expenditure plan of 4.3 billion US dollars, mostly for mature processes to expand production, and a small portion for advanced technology, construction of a new joint venture project in Beijing (SMIC Jingcheng), and others.

The bank expects a sharp increase in the company's capital expenditure in the second quarter. Looking ahead to the whole year, the release of the company's new production capacity will be mainly concentrated in the second half of the year. The bank expects to be affected by both production expansion and price increases. The company's annual revenue is expected to increase quarterly month-on-month. Furthermore, the company's sale of SMIC Changdian is expected to bring in an additional investment income of about 400 million US dollars.

The bank expects that the company will continue to benefit from domestic production substitution, maintain downstream prosperity, and the trend is positive in 2021; due to strong demand and rising prices under industry shortages, the company's revenue and gross margin in 2021 are expected to be better than previously anticipated.

Furthermore, the company's new sale of SMIC Changdian brought additional investment income, and government project funding is expected to continue in the future. CITIC Securities raised its 2021-23 net profit forecast to $1,105 million/823 million/US$908 million (original forecast of $487 million/553 million/US$728 million), corresponding to the 2021-23 EPS forecast of HK$1.09/0.81/0.9, and net assets per share of HK$15.76/16.58/17.49.