SMIC Reports 42.8% Net Profit Growth for Q3 2024

Business Description

Semiconductor Manufacturing International Corporation (SMIC) is one of the leading foundries in the world, with advanced manufacturing capabilities and comprehensive services. The company provides semiconductor foundry and technology services, producing 8-inch and 12-inch wafers. Headquartered in Shanghai, China, SMIC has manufacturing facilities in Shanghai, Beijing, Tianjin, and Shenzhen, along with marketing and customer service offices in the U.S., Europe, Japan, and Taiwan.

Industry Position and Market Share

SMIC operates in the competitive semiconductor industry. As a leading foundry, it competes with other major players like TSMC and GlobalFoundries. SMIC’s strategic focus on expanding its manufacturing capacity and improving its technology has helped it maintain a significant market share, particularly in the Chinese Mainland.

Revenue Streams and Customer Base

SMIC’s primary revenue streams come from wafer manufacturing, which accounts for 94.4% of its revenue. The company serves a diverse range of industries, including smartphones, computers, consumer electronics, connectivity and IoT, and industrial and automotive sectors. In Q3 2024, consumer electronics made up the largest portion of the wafer revenue at 42.6%.

Financial Statement Analysis

Income Statement

For Q3 2024, SMIC reported revenue of \$2,171.2 million, a 14.2% increase from Q2 2024. Gross profit increased by 67.5% to \$444.2 million, with a gross margin of 20.5%. Operating expenses rose to \$274.3 million, resulting in a profit from operations of \$169.9 million. The net profit for Q3 2024 was \$223.3 million, a 42.8% year-over-year increase.

Balance Sheet

As of September 30, 2024, SMIC’s total assets were \$47.2 billion, with total equity of \$31.4 billion. The company’s liquidity ratios indicate a strong financial position, with a current ratio of 1.6 and a quick ratio of 1.2. SMIC’s total debt stood at \$10.4 billion, resulting in a debt-to-equity ratio of 33.1%.

Cash Flow Statement

Net cash generated from operating activities was \$1.2 billion. The company invested \$1.3 billion in property, plant, and equipment, resulting in a net cash outflow from investing activities of \$1.3 billion. Financing activities used \$97 million, mainly for debt repayment. Despite these investments, cash and cash equivalents remained robust at \$3.65 billion.

Key Findings

Strengths

• Record high quarterly revenue of \$2.17 billion.
• Significant net profit growth of 42.8% year-over-year.
• Strong cash position with \$3.65 billion in cash and cash equivalents.
• Increase in monthly capacity to 884,250 8″ equivalent wafers.

Risks

• Increased operating expenses, up 54.1% QoQ.
• Decline in other income, down 26.9% QoQ.
• Potential risks associated with geopolitical tensions and market cyclicality.

Special Activities

SMIC is focusing on increasing its manufacturing capacity and improving its product mix, which has contributed to higher blended ASP and utilization rates. The company plans to maintain strategic focus and stabilize market share to consolidate its industry position.

Investor Recommendations

For Current Investors

Hold: Given the company’s strong financial performance, significant net profit growth, and robust cash position, it is advisable for current investors to hold their shares. SMIC’s strategic initiatives and industry position provide a positive outlook.

For Potential Investors

Buy: For potential investors, SMIC presents a compelling investment opportunity due to its solid financial performance, growth in revenue and profit, and strategic focus on expanding capacity and improving product mix.

Disclaimer

The recommendations provided are based on the financial information available as of November 7, 2024, for the financial quarter ended September 30, 2024. Investors should consider their own financial situation and consult with a financial advisor before making any investment decisions.