Guohai Securities: SMIC 2021Q1 performance exceeded expectations, continue to benefit from the upward prosperity of the industry

The company released its quarterly report for 2021: 2021Q1 achieved a revenue of 7.292 billion yuan (+ 13.92%) and a net profit of 1.032 billion yuan (+ 136.39%). At the same time, the company expects 2021Q2 to achieve a revenue of 8.532 billion yuan to 8.677 billion yuan (+ 33.29% Mel 35.56%, QoQ + 17% Mel 19%), and 2021Q2 is expected to achieve a gross profit margin of 22%. 25%.

Main points of investment:

2021Q1 performance exceeded expectations, the company continued to release production capacity. The company's production capacity climbed steadily, with 2021Q1 production capacity of 54.08 million pieces per month (+ 13.6% 8-inch equivalent), capacity utilization rate of 98.7% (+ 0.2pct, month-on-month ratio + 3.2pct), wafer sales of 1.5589 million pieces (+ 10.82%, month-on-month ratio of 10.11%), gross profit margin of 26.97% (+ 5.39pct, month-on-month + 5.51pct), exceeding market expectations. From the perspective of process nodes, the company's mature process performance is outstanding, with 2021Q1 accounting for 6.9% of 14/28nm revenue (- 0.9pct, ring ratio + 1.9pct), 40/45nm nodes accounting for 16.3% of revenue (+ 1.4pct, ring ratio + 1.5pct), and 90nm and above nodes accounting for 4.1% of revenue (+ 2.5pct, ring ratio + 0.6pct). From the perspective of downstream applications, 2021Q1 smartphone revenue accounts for 35.2% (- 13.1%, month-on-month ratio-1.5%), smart home revenue accounts for 13.9% (- 1.6%, month-on-month ratio-1.9%), and consumer electronics revenue accounts for 20.4% (+ 2.0%, month-on-month ratio + 0.2%). In terms of expenses, 2021Q1's overall inter-period expense rate (excluding R & D) is 1.81% (- 3.79pct), of which the sales expense rate is 0.48% (- 0.15pct), the management expense rate is 3.95% (- 2.90pct), and the financial expense rate is-2.62% (- 0.74pct). In terms of capital expenditure, the company's 2021Q1 capital expenditure is about 3.5 billion yuan, and the planned capital expenditure for the whole year is about 28.1 billion yuan, most of which is used to expand production through mature processes. Looking forward to the whole year, considering that the capacity tension in the wafer foundry industry will continue, the company as a domestic wafer foundry leader will benefit significantly.

The tight situation of supply and demand in the industry is expected to last until 2022, and there is a bright future for the company to increase the mature process. At present, the semiconductor industry chain shows an imbalance between supply and demand, the downstream demand is strong, the upstream supply is insufficient, superimposed overseas epidemic rebound and other disturbance factors, the semiconductor industry capacity tension is becoming more and more serious. As the largest wafer foundry in China, the 2021Q1 contract debt reached 2.038 billion yuan, an increase of 57.13% over the previous month. The company continues to promote the mature production process expansion plan, plans to expand the production of the mature process 12-inch production line by 10,000 pieces in 2021, and not less than 45,000 pieces of the 8-inch production line in 2021. At the same time, it plans to build a joint venture with the Shenzhen government to build a 12-inch production line of 28nm and above, with a planned monthly production capacity of 40,000 tablets, which is expected to start production in 2022. In the short term, the company will continue to benefit from the tight trend of semiconductor production capacity and strong performance certainty; in the medium to long term, the downstream demand such as power management, radio frequency, image signal processing and so on will be strong, and the company will add code to the mature compliance declaration process. it is expected to take advantage of the industry's magnificent demeanor to lead the rapid rise of the wave of localization. Guohai Securities Co., Ltd. does not hold more than the stock held by the company-0.5000-0.4000-0.3000-0.2000-0.1000 0.0000 0.1000 0.2000 0.3000 0.4000 0.5000 0.6000 20 Greater 07 20lash 08 2009 20x10 20 Grey 12 21 Simplex 02 21Gram02 2103 21Universe SMIC CSI Securities Research report Please be sure to read the text after the waiver section 2 1% of the issued shares.

Profit forecast and investment rating: wafer manufacturing is the key to realize self-control of China's semiconductor industry chain. As the leader of wafer foundry in mainland China, the company has perfect process nodes and advanced technology. It is expected to fully benefit from the current business cycle and the major trend of domestic substitution, and continue to thicken the industry performance. We keep our profit forecast unchanged. It is estimated that the company's net profit from 2021 to 2023 will be 3.795 million RMB 46.24 trillion RMB 5.514 billion respectively, the latest share capital corresponding EPS will be 0.48 pm 0.59 pound RMB 0.70 per share, and the valuation of the corresponding pre-PE will be 116-95-80 times, maintaining the "Buy" rating.

Risk hints: the risk of US export control policy adjustment; the risk of new capacity climbing less than expected; and the downside risk of industry prosperity.