Goldman Sachs raises target price for SMIC H-shares to HK$135, bullish on five major driving factors.

Goldman Sachs released a report stating that the gross margin of SMIC in the first quarter of 2026 exceeded the bank's expectations. The bank expects that in 2026, the company will be driven by five major factors, including the trend of AI driving demand for supporting analog/logic chips; the continuous growth in demand for mainstream products as overseas competitors shift their focus to high-end AI chips; continuous capacity expansion; increased demand from domestic customers due to supply security considerations, and improvement in product mix as the growth rate of high-margin products exceeds that of traditional products. Goldman Sachs expects SMIC to maintain a high capacity utilization rate in the second quarter of 2026, support gross margin through a better product mix and higher average selling price, and release room for revenue growth through continuous capacity expansion. They maintain a "buy" rating with an H-share target price raised slightly from HK $134 to HK $135. The bank has raised profit forecasts for SMIC for the years 2026 to 2029 by 1% each, and holds an optimistic outlook on revenue prospects due to strong demand for AI-related products, which will help enhance pricing power.