On Friday, Semiconductor Manufacturing International Corp. (981:HK) (NYSE: SMI) saw its stock price target increased to HK$18.00 from HK$16.64, while its stock rating remained at Hold. The adjustment follows a robust performance in the second quarter of 2024, where the company's gross margin (GM) surpassed expectations set by Jefferies, consensus, and the company's own guidance.
The semiconductor firm's GM exceeded projections by 3.4 percentage points according to Jefferies and consensus estimates, and by 3.9 percentage points compared to their own forecast. This was largely attributed to an early increase in orders from overseas clients and a recovery in the utilization rate (UTR).
For the third quarter of 2024, revenue guidance also beat Jefferies and consensus estimates by 16% and 17%, respectively, with GM projections surpassing by 9.5 and 7.2 percentage points.
The positive outlook for the third quarter is credited to the acceleration of localization efforts, sustained demand in consumer electronics, and a higher proportion of 12-inch wafers contributing to an increased average selling price (ASP). However, visibility into the fourth quarter remains unclear. The firm's long-term risk of oversupply has not been mitigated, prompting the continued Hold rating, as concerns about return on equity (ROE) persist.
The analysis provided by Jefferies reflects a cautious optimism for Semiconductor Manufacturing International Corp., acknowledging recent operational successes while also considering potential future challenges in the market. The raised price target suggests a recognition of the company's current trajectory, yet the Hold rating indicates a watchful eye on the horizon for any shifts in the industry landscape.
InvestingPro Insights
As Semiconductor Manufacturing International Corp. (981:HK) (NYSE: SMI) navigates through a dynamic market landscape, the latest data from InvestingPro provides valuable insights into the company's financial health and stock performance. With a P/E Ratio (Adjusted) of 22.39, SMI demonstrates a market valuation that investors may find attractive when coupled with its PEG Ratio of 0.2, suggesting potential for future earnings growth at a rate that could justify the current P/E.
The company's Price/Book ratio of 0.45 indicates that the stock is trading below its book value, which could signal an undervalued opportunity to market participants. Additionally, the robust Revenue Growth of 11.39% in the last twelve months as of Q2 2024 reflects SMI's ability to increase its sales effectively amidst the industry's competitive environment.
InvestingPro Tips highlight the significance of the company's EBITDA Growth, which skyrocketed by 114.99% in the same period, showcasing the firm's improving profitability and operational efficiency. Furthermore, the 1 Month Price Total Return of 11.89% underscores the positive investor sentiment following the company's recent performance. For those seeking more detailed analysis, InvestingPro offers numerous additional tips to help investors make informed decisions.
With the next earnings date set for August 23, 2024, stakeholders will be keenly watching for further developments that may impact SMI's financial trajectory. The InvestingPro Fair Value of $0.09 suggests that the stock might be significantly undervalued, presenting a potential opportunity for investors. It's worth noting that there are many more InvestingPro Tips available for those interested in a deeper dive into SMI's prospects.
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