\u3000\u3000 Semiconductor Manufacturing International Corporation(688981) (688981)
Performance review
On February 10, the company announced that its revenue in the fourth quarter was US $1.58 billion, a month on month increase of 12% and a year-on-year increase of 61%. The gross profit margin of 35% and net profit margin of 34% are slightly better than market expectations. The company expects a revenue of USD 1.82-1.85 billion in the first quarter of 2022, with a month on month increase of 15-17%, which is nearly 10 points better than other wafer foundry peers, nearly 16 points better than the market expectation, and the gross profit margin is increased to 36-38%, which is also nearly 3-5 points higher than the market expectation.
Business analysis
Growth exceeded expectations and profits exceeded the industry: Although Semiconductor Manufacturing International Corporation(688981) was included in the list of us entities this year and its expansion was repeatedly limited, the year-on-year growth of 39% revenue in 2021 is still better than that of TSMC and liandian by 25-26%. The growth of revenue in 2022 is likely to exceed that of the same industry by nearly 10 points, We attributed it to: 1) the annual price rise of 18% driven by the capacity shortage of 8 “and 12” mature processes, vs. 9% of TSMC and 14% of liandian; 2) The revenue of “SMIC 8” has increased by 28% this year, which is significantly better than 18% of TSMC, while the revenue of “12” mature process has increased by 55% year-on-year, which is significantly better than that of TSMC with serious mismatch of capital expenditure and capacity expansion (only 3% year-on-year revenue growth in “12” mature process); 3) Like Huahong, SMIC benefited greatly from the substitution of domestic chips. In the fourth quarter, the proportion of revenue of customers in mainland China and Hong Kong increased by nearly 12 points year-on-year to 68.3%, and the revenue increased by nearly times year-on-year.
Investment advice
Due to the higher than expected operating profit, we raised the net profit of 2021 / 2022 by 30% / 6% to RMB 10.96 billion / 14.4 billion. However, due to the correction of the previous high valuation of the company’s a shares, the current transaction is 37x / 28x / 26x PE, which is more reasonable in 2021 / 2022e / 2023e, and the Pb is 3.7/3.3/2.9x. We decided to change SMIC from “overweight” to “buy”, But the target price remained at 77 yuan.
Risk tips
The risk of Semiconductor Manufacturing International Corporation(688981) technology, equipment, materials and consumables being blocked by the U.S. Department of Commerce. This year, due to the slowdown of the epidemic, it will affect the demand for five computers at home (laptop, chromebook, tablet, LCD / OLED TV and large-size mobile phones). The industry is actively expanding the risk of 40 / 28nm
