SEMICONDUCTOR MANUFACTURING INT‘L CORP.(688981):DOWNSTREAM DEMAND DIVERGING;INCREMENTAL RESTOCKING STILL UNDERWAY

类别:公司 机构:中国国际金融股份有限公司 研究员:Xuelai LI/Jiongyi HU/Qiaosheng CHENG 日期:2022-05-26

  1Q22 results slightly beat guidance

      Semiconductor Manufacturing International Corporation (SMIC) reported unaudited 1Q22 H-share results: Revenue was US$1.84bn (+16.6% QoQ and +66.9% YoY); net profit was US$0.45bn (-16.4% QoQ and +181.1% YoY), in line with guidance; and gross margin was 40.7% (+5.7ppt QoQ and +18ppt YoY), better than guidance, mainly thanks to high capacity utilization rate amid the delay of annual repairs, and smaller-than-expected impact of COVID-19 on Shenzhen and Tianjin factories.

      Trends to watch

      Management expects short-term structural shortage of semiconductor capacity to worsen in 1H22. The COVID-19 pandemic and regional geopolitical conflicts have brought uncertainties to the global integrated circuit supply chain. Market demand for new energy vehicles, display panels, and industrial sectors rose in 1H22, while demand for smartphones and consumer electronics remained weak. In 1Q22, revenue from the firm’s smartphone business rose 7% QoQ to US$528.62mn, revenue from the smart home business rose 27% QoQ to US$254.18mn, and revenue from the consumer electronics business grew 14% QoQ to US$425.48mn.

      Capacity expansion proceeding smoothly; capex guidance intact for 2022. Monthly capacity of the firm’s 8’’ wafers reached 649,000 pieces in 1Q22, up by about 28,000 slices vs. 4Q21; shipments of 8’’ wafers equaled about 1.84mn pieces, implying a capacity utilization rate of 100.4% (+1ppt QoQ)。 Revenue contribution from 12’’ wafers grew 1ppt QoQ to 66.5%. In 1Q22, the actual H-share capex was US$869mn. The firm guides its 2022 capex at US$5.0bn, for the expansion of existing factories and the building of three new factories.

      Management released 2Q22 guidance, expecting H-share revenue to rise 1-3% QoQ with gross margin at 37-39%, as the firm expects its capacity utilization rate to decline in 2Q22, due to the annual repairs of some factories being put off until 2Q22 and the impact of COVID-19 on the Shanghai factory. The firm also expects above-average earnings growth in 2022.

      Financials and valuation

      Considering possible wafer price hikes due to inflation and order cuts stemming from weak mobile phone demand, we maintain our 2022 and 2023 revenue forecasts at US$7.56bn and US$ 8.61bn and lift our net profit forecasts by 13% and 15% to US$1.83bn and US$1.95bn for SMIC-H; we maintain our 2022 and 2023 revenue forecasts at Rmb53.38bn and Rmb60.38bn and lift our net profit forecasts by 19% and 21% to Rmb11.80bn and Rmb12.53bn for SMIC-A. SMIC-H is trading at 0.9x/0.8x 2022e/2023e P/B. SMIC-A is trading at 2.8x/2.5x 2022e/2023e P/B. We maintain OUTPERFORM, but cut our target prices 44.4% and 37.5% each to HK$20 and Rmb55. The new target price reflects the falling average valuations, implying 1.1x/3.6x 2022e P/B and 1.0x/3.3x 2023e P/B for SMIC-H/SMIC-A, offering 17.65%/29.78% upside.

      Risks

      Disappointing capacity utilization rate and/or product prices; the spread of COVID-19.