<Research>HTSC: SMIC Enhances Capital Structure for Greater Profit Flexibility; Rating Maintained at Buy
Acquisition Plans: SMIC plans to acquire a 49% equity stake in SMNC for approximately RMB40.6 billion, with funding from institutions including the third phase of China's integrated circuit Big Fund, which will inject USD7.778 billion into SMSC.
Financial Impact: The transactions are expected to enhance financial performance, potentially introducing around USD4.1 billion in external funds and increasing cash reserves by about 101%.
Net Asset Growth: The equity swap acquisition may lead to a 6.3% growth in net asset value per share, raising it to RMB20.1.
Target Prices and Ratings: Huatai Securities maintains a target price of HKD100 for SMIC's H-shares and RMB192 for its A-shares, with an unchanged Buy rating.
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CICC Reaffirms Outperform Rating for SMIC (00981.HK); 4Q25 Results Meet Expectations
SMIC 4Q25 Results: SMIC reported H-share revenue of USD2.489 billion for 4Q25, a 4.5% increase QoQ, with a gross margin of 19.2%, down from the previous quarter, aligning with broker forecasts.
2025 Full-Year Performance: The company's full-year revenue for 2025 reached USD9.327 billion, a 16.2% YoY increase, with a gross margin of 21%, up 3 percentage points YoY.
1Q26 Guidance: SMIC anticipates flat revenue QoQ for 1Q26, with a gross margin expected between 18-20%, consistent with broker estimates, and projected revenue growth for 2026 to surpass peers.
Broker Ratings: M Stanley maintained an Overweight rating for SMIC, citing its strong position in wafer manufacturing, with target prices set at RMB150 for A-shares and HKD100 for H-shares.
Citi Increases Price Targets for SMIC and HUA HONG SEMI to HKD 75 and HKD 115
Financial Results Overview: SMIC and HUA HONG SEMI's 4Q25 financial results were in line with company guidance, but the 1Q26 outlook was slightly below expectations.
Market Performance: SMIC's stock rose by 0.501% and HUA HONG SEMI's by 0.854%, with significant short selling activity reported for both companies.
Growth Prospects: Both companies expect growth driven by localization demand for semiconductors in China and AI opportunities, despite challenges from increased depreciation and competition affecting profit margins.
Target Price Adjustments: Citi raised SMIC's target price from HKD53 to HKD75 (Neutral rating) and HUA HONG SEMI's from HKD105 to HKD115 (Buy rating).
HSI Declines by 392 Points; KNOWLEDGE ATLAS Surges 5% Amid Ongoing AI Stock Rally
Market Overview: The HSI opened 1.5% lower at 26,640, with significant declines in tech stocks such as TENCENT and KUAISHOU, which dropped 1.7% and 1.9% respectively.
Short Selling Activity: Notable short selling was observed in several tech stocks, including BIDU and BILIBILI, with ratios exceeding 20%, indicating bearish sentiment among investors.
PPI Data: China's Producer Price Index (PPI) YoY for January showed a decline of 1.4%, slightly better than the previous value of -1.9% and above the forecast of -1.5%.
AI Stock Rally: The AI sector saw gains with MINIMAX-WP rising 11.9% after launching a new programming model, while KNOWLEDGE ATLAS also experienced a significant increase of 16.9%.
SMIC Faces Shortages and Rising Prices for Memory and BCD
Company Performance: SMIC reported a short selling of $139.92M with a ratio of 4.881%, indicating market activity around its stock.
Product Supply and Pricing: The company noted a short supply of memory and BCD products, leading to rising prices, and plans to focus on supporting iterative products to stabilize prices.
Market Demand: SMIC's executives stated that demand for mid-to-low-end mobile phones remains stable, with historical trends showing that insufficient supply can amplify demand and increase prices.
Analyst Insights: Goldman Sachs indicated that SMIC's operating profit for Q4 2025 exceeded expectations, reflecting positive financial performance.
Nomura Maintains Neutral Rating on SMIC, Anticipates Mid to High Double-Digit Revenue Growth This Year
SMIC's Financial Performance: Nomura's report shows that SMIC met expectations for wafer revenue and gross margin in Q4 2025, with guidance for flat revenue and a gross margin of 18-20% in Q1 2026.
Future Growth Projections: Management expects SMIC's full-year revenue growth for 2026 to surpass peers, with Nomura predicting actual growth in the mid to high double digits.
Broker Rating and Target Price: Nomura maintains a Neutral rating on SMIC, setting a target price of HKD 75.
Short Selling Activity: SMIC has experienced significant short selling, amounting to $117.74 million, with a short selling ratio of 7.421%.
CLSA Reduces Earnings Projections for SMIC (00981.HK) While Maintaining Outperform Rating
4Q25 Results and Guidance: SMIC's 4Q25 results and 1Q26 guidance met expectations, with ongoing demand for consumer electronics despite memory shortages.
Memory Shortage Outlook: The company anticipates that the memory shortage will improve within 9-12 months.
Capital Expenditure Plans: SMIC plans to maintain its capital expenditure at US$8.1 billion for 2026, with a projected 30% increase in depreciation expenses year-over-year.
Earnings Forecast Adjustments: CLSA has reduced its earnings forecasts for SMIC for 2026 and 2027 by 14% and 11%, respectively, while keeping target prices and ratings unchanged.
CICC Reaffirms Outperform Rating for SMIC (00981.HK); 4Q25 Results Meet Expectations
SMIC 4Q25 Results: SMIC reported H-share revenue of USD2.489 billion for 4Q25, a 4.5% increase QoQ, with a gross margin of 19.2%, down from the previous quarter, aligning with broker forecasts.
2025 Full-Year Performance: The company's full-year revenue for 2025 reached USD9.327 billion, a 16.2% YoY increase, with a gross margin of 21%, up 3 percentage points YoY.
1Q26 Guidance: SMIC anticipates flat revenue QoQ for 1Q26, with a gross margin expected between 18-20%, consistent with broker estimates, and projected revenue growth for 2026 to surpass peers.
Broker Ratings: M Stanley maintained an Overweight rating for SMIC, citing its strong position in wafer manufacturing, with target prices set at RMB150 for A-shares and HKD100 for H-shares.
Citi Increases Price Targets for SMIC and HUA HONG SEMI to HKD 75 and HKD 115
Financial Results Overview: SMIC and HUA HONG SEMI's 4Q25 financial results were in line with company guidance, but the 1Q26 outlook was slightly below expectations.
Market Performance: SMIC's stock rose by 0.501% and HUA HONG SEMI's by 0.854%, with significant short selling activity reported for both companies.
Growth Prospects: Both companies expect growth driven by localization demand for semiconductors in China and AI opportunities, despite challenges from increased depreciation and competition affecting profit margins.
Target Price Adjustments: Citi raised SMIC's target price from HKD53 to HKD75 (Neutral rating) and HUA HONG SEMI's from HKD105 to HKD115 (Buy rating).
HSI Declines by 392 Points; KNOWLEDGE ATLAS Surges 5% Amid Ongoing AI Stock Rally
Market Overview: The HSI opened 1.5% lower at 26,640, with significant declines in tech stocks such as TENCENT and KUAISHOU, which dropped 1.7% and 1.9% respectively.
Short Selling Activity: Notable short selling was observed in several tech stocks, including BIDU and BILIBILI, with ratios exceeding 20%, indicating bearish sentiment among investors.
PPI Data: China's Producer Price Index (PPI) YoY for January showed a decline of 1.4%, slightly better than the previous value of -1.9% and above the forecast of -1.5%.
AI Stock Rally: The AI sector saw gains with MINIMAX-WP rising 11.9% after launching a new programming model, while KNOWLEDGE ATLAS also experienced a significant increase of 16.9%.
SMIC Faces Shortages and Rising Prices for Memory and BCD
Company Performance: SMIC reported a short selling of $139.92M with a ratio of 4.881%, indicating market activity around its stock.
Product Supply and Pricing: The company noted a short supply of memory and BCD products, leading to rising prices, and plans to focus on supporting iterative products to stabilize prices.
Market Demand: SMIC's executives stated that demand for mid-to-low-end mobile phones remains stable, with historical trends showing that insufficient supply can amplify demand and increase prices.
Analyst Insights: Goldman Sachs indicated that SMIC's operating profit for Q4 2025 exceeded expectations, reflecting positive financial performance.
Nomura Maintains Neutral Rating on SMIC, Anticipates Mid to High Double-Digit Revenue Growth This Year
SMIC's Financial Performance: Nomura's report shows that SMIC met expectations for wafer revenue and gross margin in Q4 2025, with guidance for flat revenue and a gross margin of 18-20% in Q1 2026.
Future Growth Projections: Management expects SMIC's full-year revenue growth for 2026 to surpass peers, with Nomura predicting actual growth in the mid to high double digits.
Broker Rating and Target Price: Nomura maintains a Neutral rating on SMIC, setting a target price of HKD 75.
Short Selling Activity: SMIC has experienced significant short selling, amounting to $117.74 million, with a short selling ratio of 7.421%.
CLSA Reduces Earnings Projections for SMIC (00981.HK) While Maintaining Outperform Rating
4Q25 Results and Guidance: SMIC's 4Q25 results and 1Q26 guidance met expectations, with ongoing demand for consumer electronics despite memory shortages.
Memory Shortage Outlook: The company anticipates that the memory shortage will improve within 9-12 months.
Capital Expenditure Plans: SMIC plans to maintain its capital expenditure at US$8.1 billion for 2026, with a projected 30% increase in depreciation expenses year-over-year.
Earnings Forecast Adjustments: CLSA has reduced its earnings forecasts for SMIC for 2026 and 2027 by 14% and 11%, respectively, while keeping target prices and ratings unchanged.
