Guosen Securities expressed optimism regarding the long-term development prospects of China's leading wafer foundry, maintaining an "Outperform Market" rating. Based on SMIC's (00981) fourth-quarter 2025 results and first-quarter 2026 guidance, the brokerage has raised its net profit attributable to shareholders forecasts for 2025-2027 to $685 million, $876 million, and $1.031 billion, respectively, up from prior estimates of $648 million, $808 million, and $945 million. As of February 10, 2026, the stock price implies a price-to-book ratio of 3.3 times for 2026. The key points from Guosen Securities are as follows.
SMIC's fourth-quarter 2025 revenue reached $2.489 billion, representing a year-on-year increase of 12.8% and a quarter-on-quarter increase of 4.5%. This exceeded the high end of the company's guidance for flat to 2% quarterly growth, setting a new quarterly revenue record. Wafer revenue accounted for 92.4% of total revenue. The gross profit margin declined to 19.2%, down 3.4 percentage points year-on-year and 2.7 percentage points quarter-on-quarter, primarily due to increased depreciation, but was in line with guidance. Net profit attributable to shareholders was $173 million, up 60.7% year-on-year but down 10.0% quarter-on-quarter. For the first quarter of 2026, the company expects revenue to be roughly flat compared to the fourth quarter of 2025, with a gross margin projected between 18% and 20%. Full-year 2026 revenue growth is anticipated to exceed the average of comparable peers.
Shipments in the fourth quarter of 2025 totaled 2.51 million 8-inch equivalent wafers, a 26.3% increase year-on-year and a 0.6% rise quarter-on-quarter. The capacity utilization rate was 95.7%, up 10.2 percentage points year-on-year but down 0.1 percentage points from the previous quarter. Within wafer revenue, 12-inch wafers contributed 77.2%, while 8-inch wafers accounted for 22.8%. The average selling price per 8-inch equivalent wafer increased quarter-on-quarter to $914, though it was down 11% year-on-year. Capital expenditure for the fourth quarter was $2.408 billion, surging 45% year-on-year and edging up 0.6% quarter-on-quarter. Monthly capacity in 8-inch equivalent wafers grew by 36,000 units from the end of the third quarter to 1.059 million units. Capital expenditure for 2026 is projected to be roughly consistent with 2025, at approximately $8.1 billion.
Analyzing fourth-quarter wafer revenue by application, only the computer and tablet segment experienced a year-on-year decline, falling 24.7%. All other segments saw growth, with the industrial and automotive segment surging 81.4% and consumer electronics rising 43.4% year-on-year. Sequentially, consumer electronics, industrial and automotive, and smartphone segments grew by 19.6%, 12.5%, and 9.8%, respectively. Conversely, the computer and tablet segment declined 14.8%, while the interconnect and wearables segment decreased 1.2%. Geographically, the proportion of revenue from China increased quarter-on-quarter to 87.6% in the fourth quarter, while contributions from the U.S. and Europe/Asia stood at 10.3% and 2.1%, respectively.
The company plans to issue shares to acquire the remaining 49% minority stake in SMIC Beijing. From January to August 2025, SMIC Beijing reported revenue of 9 billion yuan and a net profit of 1.5 billion yuan, with a gross margin of 14.74%. The entire equity of SMIC Beijing is valued at 82.859 billion yuan. Additionally, SMIC has entered into a new joint venture contract and a capital increase agreement with partners, including the National Integrated Circuit Industry Investment Fund. The investors will contribute a total of $7.778 billion in cash to SMIC Shanghai. Following this capital injection, SMIC's stake in SMIC Shanghai will increase from 38.515% to 41.561%. SMIC Shanghai reported net profits of 3.6661 billion yuan in 2023 and 3.9315 billion yuan in 2024, with net assets reaching 57.462 billion yuan as of September 30, 2025.
Potential risks include a slowdown in downstream demand, delays in capacity expansion, and heightened international tensions.
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