On the evening of May 9, 2024 (Beijing time), SMIC International (0981. HK/688981. SH) released its financial report for the first quarter of 2024 (as of March 2024) after the Hong Kong stock market closed. The key points are as follows:
1. Overall performance: both revenue and gross profit margin exceeded expectations. SMIC International achieved revenue of $1.75 billion in this quarter, up 4.3% month on month , exceeding the upper limit of the company's guidelines (2%), Better than market expectations (US $1691 million) 。$ SMIC International HK Gross profit margin continued to decline to 13.7% in this quarter ， But better than market expectation (11.8%) 。
2. Take a closer look at the three core indicators: revenue, gross profit rate and capacity utilization. The revenue side is split by volume and price, $SMIC International SH The rise in revenue in this quarter is mainly driven by shipments , while the price side is still falling. Driven by the structural recovery of some downstream businesses, the shipment volume and capacity utilization rate have increased , while the current inventory is still relatively high 。
3. Business progress: both mobile phones and consumer electronics have recovered. In the case of the recovery of domestic Android customer shipments, the company's mobile phone business and consumer electronics business increased in this quarter, accounting for 30% of both. PC and other businesses fell back this quarter. The revenue in China accounted for more than 80% in this quarter, and the company's business is still dominated by domestic customers.
4. Guidance for the next quarter: SMIC expects its revenue to grow 5-7% month on month in the second quarter of 2024, corresponding to $1.84-1.87 billion, Exceeding the consensus market expectation ($1.71 billion) ； Gross profit margin 9-11%, Lower than market expectation (11.85%) 。
Dolphin King's point of view:
On the whole, SMIC's financial report was good. Both revenue and gross profit margin exceeded market expectations. Although gross profit margin is still relatively low, the revenue side has begun to improve. The revenue growth in this quarter was mainly driven by the mobile phone and consumer electronics businesses.
Combined with the guidance given by the company for the next quarter, although the gross profit margin is still given a low guidance of 9-11%, the revenue has increased by 5-7% month on month 。 The current high inventory situation of the company will continue to suppress the recovery of gross profit margin, but the growth of the revenue side also indicates that some downstream demand of the company has rebounded.
Dolphin Jun believes that driven by some downstream businesses, the company's revenue side is expected to take the lead out of the trough, while the profit side will remain at a relatively low position in the short term 。 Under the influence of structural driving, with the inventory reduction and industry improvement, the company's profitability is expected to be improved.
Affected by the semiconductor industry cycle, the company's performance and share price have a greater impact. Historically, the current gross profit rate has been the lowest point of the company. Any improvement in the downstream is expected to bring about improvement in the company's performance 。 The current share price of the company has also reflected the market's expectation of the company's downturn, and the industry and the company are showing signs of improvement, which have the opportunity to promote the company's rise.
The following is a detailed analysis of SMIC by Dolphin Jun:
Core indicators of SMIC International: revenue, gross profit rate and capacity utilization
Core indicator 1: revenue side
In the first quarter of 2024, SMIC International achieved revenue of 1.75 billion US dollars, an increase of 4.3% month on month, Exceeding the guidance expectation (2% month on month growth) 。 The company's shipments continued to rise in this quarter, while the price continued to decline month on month.
From the perspective of volume and price, the main influencing factors of SMIC's revenue growth in this quarter are:
1) The dimension of quantity, SMIC's wafer shipment volume this quarter (equivalent to 8 inches) It reached 1795000 pieces, up 7.2% month on month ；
2) Price dimension, SMIC's revenue of single crystal circle this quarter (equivalent to 8 inches) by US $975, down 2.7% month on month 。
From the perspective of quantity price splitting, The revenue of this quarter has rebounded, mainly driven by the increase in shipments, while the price of products is still falling 。
Although the company's performance is still in a downturn, the company's capital expenditure in this quarter continues to maintain a relatively high level. The company's capital expenditure in this quarter was $2.235 billion, up 77.52% year on year. According to ASML's financial report, ArFi lithography systems are still being sold in mainland China, and the company has also contributed a large share.
Looking forward to the second quarter of 2024, SMIC International has given a quarterly guide for a 5-7% month on month increase in revenue, which corresponds to the company's expected revenue of 1.84-1.87 billion dollars in the next quarter, Significantly better than the consensus expectation of the market ($1.71 billion) 。 Dolphin Jun believes that the shipment volume has improved, while the price side is still declining, which is mainly driven by the structure of the company's downstream mobile phone and consumer electronics business.
Core indicator 2: gross profit rate
In the first quarter of 2024, SMIC's gross profit margin will be 13.7%, down 2.7 pct month on month, Better than the consensus expectation of the market (11.8%) 。
Split the cost structure of the company and analyze the reasons for the change of SMIC's gross profit rate in this quarter:
Gross profit per chip=revenue per chip - fixed cost per chip - variable cost per chip
1) Single wafer revenue : SMIC's single crystal circle revenue (equivalent to 8 inches) this quarter was $975, down $27/piece month on month.
2) Fixed cost of single piece (depreciation and amortization) : The fixed cost of a single chip (equivalent to 8 inches) in this quarter was $351, a decrease of $8/chip month on month.
3) Single variable cost (other manufacturing expenses) : This quarter, the variable cost of a single chip (equivalent to 8 inches) is $490, an increase of $12/chip month on month.
4) Single gross profit : SMIC's gross profit per piece (equivalent to 8 inches) this quarter was $134, a decrease of $31/piece month on month.
It was found through the cost split that SMIC's gross profit margin fell month on month in this quarter, Mainly due to the decline in unit income in this quarter. In combination with the current inventory and capital expenditure, the gross profit margin of the company will remain relatively low.
Looking forward to the second quarter of 2024, SMIC International continued to give quarterly guidance on gross profit rate of 9-11%, Below market expectations (11.85%) 。 Dolphin Jun believes that there are two main reasons: 1) higher inventory will continue to suppress the increase of gross profit margin; 2) The Company's higher capital expenditure will continue to increase depreciation and amortization expenses.
Core indicator 3: capacity utilization
The capacity utilization index not only reflects the quarterly operation of SMIC International, but also reflects the prosperity trend of the whole wafer manufacturing industry. Now, with the relative downturn of semiconductors, the order adjustment of downstream manufacturers will directly affect the capacity utilization of chip manufacturers.
In the first quarter of 2024, SMIC International's capacity utilization rate was 80.8%. Although the company's capacity utilization rate was still low in this quarter, it has rebounded. Dolphin Jun believes that part of the downstream of the company is warming up, driving the continuous improvement of the shipment volume, and then driving the capacity utilization rate back to 80%. From the growth guidance of the next quarter, the company's capacity utilization is expected to continue to improve 。
At the business level, look at SMIC International
After reading the three core indicators, Mr. Dolphin and everyone together looked at SMIC's quarterly business in an all-round way:
2.1 Downstream markets
In this quarter, SMIC's smartphone business revenue accounted for 31.2% and continued to rise, which is the main source of revenue growth in this quarter. This is mainly driven by the recovery of downstream Android customer shipments. In addition, the consumer electronics business also rebounded significantly.
The company subdivided other businesses in the past, of which computer and tablet businesses accounted for 17.5%, and industrial and automotive businesses accounted for 7.2%, both of which declined to varying degrees.
There are growth and decline in all businesses. The growth of revenue in this quarter is mainly driven by the structural pull of business.
2.2 Dimensions of each wafer
Since the first quarter of 2022, SMIC International will no longer disclose the revenue share of each process node, but only disclose the revenue share of 8 inch and 12 inch wafers, which makes it impossible to see the revenue changes of each node in detail.
In this quarter, the proportion of SMIC's 12 inch wafer revenue continued to rise, reaching 75.6%. In terms of the proportion of the two sizes and the company's revenue, SMIC International's revenue of 12 inch chips rose 6.3% month on month in this quarter, while the revenue of 8 inch chips fell 1.4% month on month.
2.3 Distribution by region
SMIC has readjusted its regional income distribution from the original "North America/Mainland China and Hong Kong/Europe and Asia" to the current "China/US/Eurasia". Due to the adjustment of the caliber, the data is slightly different.
From the perspective of regional revenue in this quarter, the revenue in China continued to maintain about 80%, and the domestic market was the main source of revenue for the company. The main source of the company's growth in this quarter is the pull of domestic Android customers.
See SMIC International for business data
3.1 Operating expenses: the expense side remains stable
From the perspective of operating expenses, SMIC's operating expenses in this quarter were 237 million US dollars, rising slightly, mainly due to the decrease of other operating income in this quarter.
In terms of the operating expenses in this quarter, the research and development expenses were $188 million, the general and administrative expenses were $116 million, and the sales and marketing expenses were $09 million. All expenses remained relatively stable.
3.2 Business indicators: inventory is still high
From the perspective of business indicators, we mainly observe the company's inventory and accounts receivable:
① SMIC's inventory in this quarter was $2.768 billion, up 1.2% month on month;
② The accounts receivable of SMIC in this quarter were $1.078 billion, down 7.9% month on month.
③ Combined with the relationship between inventory&accounts receivable and revenue in the balance sheet, the inventory/revenue and accounts receivable/revenue in this quarter were 158% and 62% respectively. From the perspective of operating indicators, SMIC's inventory is still high and will continue to suppress the recovery of the company's gross profit margin 。
Combining the company's inventory and capacity utilization data, we can basically see the company's trend. In the first quarter of 2022, the company's capacity utilization rate is still close to full load. As the company's inventory has continued to rise since the first quarter of 2022, the company's capacity utilization rate began to loosen from the second quarter. Then combined with the current inventory situation, Dolphin Jun expects that although the capacity utilization rate in the second quarter of 2024 will be improved due to the influence of the demand side, it will still remain at a relatively low position.
3.3 EBITDA indicator: down
From the perspective of EBITDA, SMIC International's profit before tax, interest, depreciation and amortization in this quarter continued to decline by 887 million dollars.
According to the indicators, SMIC's profit before tax, interest, depreciation and amortization mainly comes from the release of operating profit and depreciation and amortization. The decline in this quarter is mainly due to the decrease in the profit side (Dolphin Jun believes that it is mainly due to the continued decline in gross profit margin in this quarter) 。 The profit margin (before tax, interest, depreciation and amortization) of this quarter is estimated to fall back to 50.7% 。 Due to the characteristics of heavy assets in the manufacturing industry, most of the company's profits have been eroded by depreciation and amortization.
