Goldman Sachs: Maintains "Buy" rating for Semiconductor Manufacturing International Corporation (00981) with a target price of HK$134.

Goldman Sachs released a research report, maintaining a "buy" rating on Semiconductor Manufacturing International Corporation (00981), with a target price of 134 Hong Kong dollars for its H shares, equivalent to a forecasted P/E ratio of 71.6 times in 2028. The target price for Semiconductor Manufacturing International Corporation's A shares (688981.SH) is 241.6 yuan (estimated at a 196% premium to the H shares valuation). The company's long-term growth prospects are positive, driven by the growth in demand from local wafer factory customers and AI opportunities. In the fourth quarter of last year, SMIC's revenue rose by 4% quarter-on-quarter to 2.5 billion US dollars, which was 3% higher than the bank and market expectations, and higher than the management's guidance of 0% to 2% growth. The gross profit margin for the period was 19%, in line with the management's guidance of 18% to 20%, and also roughly in line with the bank and market expectations. The revenue growth was mainly due to an increase in wafer shipments and average selling price by 1% quarter-on-quarter, while the gross profit margin decreased compared to the previous quarter's 22%, mainly due to an increase in depreciation and amortization expenses. Management guidance indicates that first-quarter revenue will remain flat quarter-on-quarter, in line with the bank's expectation of 2% growth and market expectation of flat growth. The gross profit margin guidance for the first quarter remains at 18% to 20%, slightly lower than the bank's expectation of 21.7% and the market expectation of 20.9%. For the full year, SMIC's management expects revenue growth to exceed the average level of comparable peers, with capital expenditure remaining flat year-on-year; the bank believes there is room for upward guidance.