CMB International: Raising the target price of SMIC (00981) to HK$119 to maintain a “buy” rating

The Zhitong Finance App learned that CMB International released a research report stating that it will maintain the SMIC (00981) “buy” rating and raise the target price of H shares from HK$110 to HK$119, corresponding to a forecast of 5 times the market account ratio for next year. According to CMB International, SMIC's second-quarter revenue reached a record high of US$3.06 billion, up 36.1% year over year and 20% quarter over quarter; gross margin was 25.3%, up 4.9 percentage points year over year and 5.2 percentage points quarter over quarter, all higher than the upper limit of the company's guidance and market expectations. The guidance for the third quarter remains positive, with revenue expected to increase 2% to 4% quarter-on-quarter and gross margin of 26% to 28%.

Based on the second-quarter results and third-quarter guidance winning expectations, the bank raised its 2026 and 2027 revenue forecasts by 5.3% and 9.2%, respectively, and the gross margin forecast by 3.4 and 2.3 percentage points, respectively. The bank believes that SMIC is worthy of a valuation premium because of its unique strategic position, leading scale and technical breadth within the Chinese foundry ecosystem. Improved pricing capacity and capacity monetization will continue to support profit recovery, even under pressure from depreciation expenses.