Earning First Take : 3Q22 revenue guidance in line with the market consensus
- 2Q22 profit decreased by 25.2% y-o-y, ahead of the market consensus by 10%
- The higher-than-expected earning is due to a stronger earnings contribution from the joint venture and associates.
- Management is guiding 3Q22 revenue growth of 0% to 2% q-o-q, in line with the market expectations
- Expect a neutral share price reaction
– SMIC (981 HK) announced its 2Q result yesterday after market close.
– Revenue increased 41.6% y-o-y to US$ 1.9bn, reaching the upper limit of the management’s guidance, due to the robust wafer shipment growth and wafer ASP hike
– Segment-wise, 8-inch business revenue increased by 29.0% y-o-y to US$ 567.7m. 12-inch business revenue increased 54.3% y-o-y to US$ 1.2bn.
– Gross margin increased 9.3ppt to 39.4% due to a better product mix and price hike.
– Net profit decreased 25.2% y-o-y to US$ 514.3m, ahead of the market consensus by 10.2%, mainly due to a less than expected decline in earnings contribution from the joint venture and associates. EPS was US$ 0.07.
– The Fabs’ utilization rate slightly declined to 97.1%, down 3.6 ppt, due to the one-off impact of the lockdown in Shanghai.
– Management is guiding 3Q22 revenue growth of 0% to 2% q-o-q, in line with the market expectations.
– We expect a neutral share price reaction as 3Q22 guidance is in line with the market expectation.
– The strong than expected performance in profit is due to the robust shipment growth of 12-inch wafers driven by the prolonged chip shortage in the mature process node and the ASP hike in wafer
– Revenue share from China keeps increasing to 69.4% under the localisation of foundry in China.
– We expect both 8-inch and 12-inch foundry businesses to remain in huge demand and potential for further ASP hike in FY22, supported by (1) the foundry supply tightness in mature nodes, (2) localization of foundry in China, and (3) the long-lasting auto chips and IoT chips shortage.
– We maintain a BUY rating with TP at HK$21.5.
– Analyst call will be held at 8:30 am tomorrow.