Goldman Sachs: Maintains "Neutral" rating on Semiconductor Manufacturing International Corporation (00981), target price raised to HK$38.

Goldman Sachs released a research report stating that it has raised the target price of Semiconductor Manufacturing International Corporation (00981) from HKD 33.4 to HKD 38, an increase of 13.8%, while maintaining a "neutral" rating. Although Goldman Sachs is optimistic about the company's gradually rising trend, it still has concerns about the impact of increasing supply of mature node capacity, intensifying competition, and geopolitical risks on the company's valuation. Goldman Sachs expects that amid long-term growth in Chinese semiconductor demand and geopolitical risks, SMIC will show a gradually rising trend. For the fourth quarter of 2024, it is expected that revenue will increase by 1% each quarter to USD 2.2 billion, with a gross margin of 18.5%, which is better than previous data and within the guidance range from management. The report states that although the recovery of demand in various end markets varies, Goldman Sachs expects better support for the entire industry's inventory normalization by 2025. In October/November last year, China's integrated circuit (IC) production increased by 25%/23% year-on-year, and IC import volume also increased by 14%/13% year-on-year, reflecting a trend of recovery from the industry downturn in 2023. Competition and pricing remain issues of concern for the industry, although it is expected that SMIC, as a leader in the domestic market, will be more resilient than smaller peers.