CICC: First Give SMIC a 'Buy' Rating with a Target Price of HK$32

CICC International released a research report stating that it has initiated coverage on SMIC (00981.HK) with a "buy" rating and a target price of HKD 32. The bank predicts gross profit margins of 16.8% and 20% for 2024/25, slightly higher than the market's consensus expectations by 0.2 and 0.5 percentage points, respectively. The bank believes that the company's plan to steadily advance the construction of a 12-inch wafer fab with a total monthly capacity of 340,000 wafers starting from the first quarter of 2023 will not be affected by industry cycles. The pre-investment capital expenditure may return to relatively normal levels by 2025/26. The bank predicts that the company's capacity utilization rate may stabilize and rebound from the low point of 68.1% in the first quarter of 2023 to 84.7% in 2024. The gross profit margin of the company may also further rise after hitting bottom in 2024, following the dissipation of the impact of pre-investment capital expenditures, starting from the second half of 2025.