20260814-招银国际-中芯国际-00981.HK-2Q_earnings_beat_on_pricing_turn_and_earnings_recovery_8页_1mb

SMIC (981 HK) Summary

Core Content

SMIC reported record second-quarter 2026 results, with revenue of US$3,006 million, up 20.0% quarter-over-quarter (QoQ) and 36.1% year-over-year (YoY). The gross profit margin (GPM) reached 25.3%, exceeding both the upper end of guidance and the Bloomberg consensus. The company raised its FY26/27E revenue forecasts by 5.3% and 9.2%, respectively, and GPM estimates by 3.4 and 2.3 ppts. The target price (TP) was adjusted to HK$119, based on a 5x FY27E price-to-book (P/B) ratio, which is higher than its peers' average of 4.0x.

Main Points

• Strong Earnings Performance:
  • SMIC's attributable net profit in 2Q26 reached US$479 million, a 142.7% increase QoQ and 261.7% YoY.
  • Operating profit hit US$534 million, a 254.5% increase YoY.
• Pricing and Mix Impact:
  • Pricing was the primary driver of the GPM improvement, not product mix.
  • The blended 8-inch-equivalent average selling price (ASP) rose 5.7% QoQ due to price increases negotiated in 1Q26.
• Demand Trends:
  • Demand is shifting toward industrial and automotive sectors, while smartphone exposure continues to decline.
  • The demand for BCD (Bipolar-CMOS-DMOS) remains resilient, driven by AI infrastructure needs.
• Localization and Capacity Shift:
  • China accounted for 90.2% of revenue in 2Q26, up 6.1 ppts YoY and 1.3 ppts QoQ.
  • The 12-inch wafer revenue mix increased to 78.2%, up from 76.1% YoY, reflecting the company's focus on expanding its 12-inch manufacturing base.
• Depreciation and EBITDA:
  • Depreciation remained a margin headwind, with 2Q26 depreciation at ~US$1.2 billion.
  • EBITDA margin reached 70.2%, but was influenced by non-recurring gains.
  • EBITDA is expected to remain healthy due to strong utilization and stable ASP.
• Outlook and Guidance:
  • 3Q26 guidance remains constructive, with revenue expected to grow 2-4% QoQ and GPM to reach 26-28%.
  • AI-related demand is expected to continue supporting broader foundry demand in the second half of 2026.
• Investor Concerns:
  • The net profit margin overstates the normalized run-rate due to one-off items like FX gains and fair-value changes.
  • Utilization is capped at ~95%, limiting further volume-driven upside.
  • There is no expected price-cut risk in 2026, with current pricing and margin levels supported.

Key Information

• Target Price: HK$119.00 (Previous: HK$110.00)
• Current Price: HK$67.55
• Up/Downside: 76.2%
• Market Cap: HK$406,266 million
• Average 3 Months Turnover: HK$10,695 million
• 52-Week High/Low: HK$91.05 / HK$50.05
• Total Issued Shares: 6,014.3 million
• Shareholding Structure:
  • Datang Holdings: 18.0%
  • National Integrated Circuit: 7.9%
• Investor Ratings: BUY
• Peer Comparison:
  • CMBIGM estimates suggest SMIC is undervalued relative to its peers, with a P/B ratio of 2.8x for FY27E, lower than the industry average of 4.0x.
  • SMIC's GPM and net margin are expected to outperform peers in the long term.

Financial Highlights

Metric	FY24A	FY25A	FY26E	FY27E	FY28E
Revenue (US$ million)	8,030	9,327	12,018	14,248	15,786
YoY Growth (%)	27.0	16.2	28.9	18.6	10.8
Gross Margin (%)	18.0	21.0	24.9	25.6	26.4
Net Profit (US$ million)	492.7	685.1	1,927.4	2,574.8	2,953.2
YoY Growth (%)	-45.4	39.0	181.3	33.6	14.7
EPS (Adjusted) (US$ cents)	5.99	8.39	22.55	30.08	31.35
P/B (x)	3.3	3.2	3.1	2.8	2.5
ROE (%)	2.4	3.3	8.6	10.4	10.8

Key Risks

• Weaker pricing
• Slower capacity ramp
• Geopolitical uncertainties

Conclusion

SMIC's strong 2Q26 performance, driven by pricing and demand shifts, supports its earnings recovery. The company is expected to maintain its strategic focus on localization and 12-inch capacity expansion. Despite near-term depreciation pressure, SMIC's continued pricing discipline and demand for AI-related and industrial chips should support its financial performance. The BUY rating is maintained, with an updated TP of HK$119, reflecting the company's strategic position and potential for long-term growth.