The Zhitong Finance App learned that Jefferies released a research report stating that it maintained the SMIC (00981) “holding” rating and raised the 2024-26 revenue forecast by 9%, 3%, and 1%, respectively, to reflect the recent high UTR. The overall forecast remained lower than the general consensus of the market. The target price was raised 4% from HK$16 to HK$16.64.

According to the report, the company's gross margin for the first quarter of this year fell 7.1 percentage points year on year, but it was 3.1, 2.1, and 3.7 percentage points higher than the bank's, market and guidance expectations, respectively, mainly due to the high utilization rate (UTR). Management noticed a surge in urgent orders, leading to a 20% growth guide for the first half of the year, but Jefferies is concerned that customers will only push orders from the second half of this year forward to the first half of the year.

The bank pointed out that SMIC's revenue for the first quarter increased 20% year over year to US$1.75 billion, exceeding expectations. Its UTR increased by 4 percentage points to 80.8% on a quarterly basis, but the average selling price fell 3%. Net profit for the period fell 69% year on year, better than this forecast, but 13% lower than market expectations. Management indicated that revenue for the second quarter increased by 5% to 7% on a quarterly basis, higher than expected by about 9%; gross margin was about 9%-11%, which was lower than expected. The company continues to invest heavily in expanding 12-inch production capacity. It is estimated that about 30,000 to 35,000 new chips will be added in 2024, capital expenditure is expected to be about 7.5 billion US dollars, and R&D investment is expected to increase by 20% to 30% this year. It will take time for the new project to become profitable, and it is believed that its gross margin will continue to be pressured.