JC: Raised the target price for SMIC to HKD 78 and maintained a "Neutral" rating.

JPMorgan released a report indicating that SMIC's gross margin in the second quarter was 25.3%, exceeding the bank's and market expectations by 3.6 to 4 percentage points; the gross margin guidance for the third quarter is between 26% and 28%, which is also significantly higher than the market expectation of about 22%. The main driving factor is the strong demand related to artificial intelligence, which has led to tight supply and increased pricing. The bank believes that price increases will be a sustainable driver for revenue and gross margin in the coming quarters, although further upward potential may be limited by rising depreciation burdens, with depreciation expected to grow approximately 30% and 20% year-on-year in 2026 and 2027, respectively, which is higher than the revenue growth of 27% and 16%. The bank maintains a "Neutral" rating on SMIC, raising the target price from HKD 67 to HKD 78. If a recovery in consumer demand leads to stronger and more widespread price increases, or if improved yield drives stronger growth in advanced nodes, this could present potential upside risks for the stock price.