Citigroup Raises Price Targets for SMIC and HUA HONG SEMI, Bullish on Near-Term Performance

Stock News05-19 10:13

Citigroup released a research report highlighting that both SMIC (00981) and HUA HONG SEMI (01347) are benefiting from the trend of domestic localization in China, AI-related demand, price recovery, and specialized capacity expansion. SMIC's first-quarter results exceeded expectations, and its second-quarter revenue growth guidance is also higher than market forecasts, supported by improved average selling prices, stronger shipment volumes, and enhanced order visibility. For HUA HONG SEMI, first-quarter revenue from the China market increased by 18.7% year-on-year, with broad-based growth across multiple platforms including MCU, PMIC, embedded memory, standalone flash memory, IGBT, and smart card chips. The report notes that mature nodes above 28nm remain SMIC's core profit driver, while the company continues to advance its 14nm and selective 7nm technologies. Management expects second-quarter revenue to grow 14% to 16% sequentially, with a gross margin between 20% and 22%. Citigroup believes that domestic localization, AI-related demand, and SMIC's leadership in advanced nodes among Chinese foundries will support a valuation re-rating. Regarding HUA HONG SEMI, Citigroup stated that management anticipates further room for price increases this year, particularly in NOR flash and other supply-constrained platforms, with average price increases of about 10% to 15%, potentially higher for some products. Additionally, the Wuxi 12-inch wafer fab is expected to reach full capacity in the third quarter of 2026. The firm believes that AI hardware expansion and the domestic substitution trend will provide strong order momentum for discrete components and power management products. Citigroup raised its earnings per share forecasts for SMIC for 2026 and 2027 by 27% and 27%, respectively, reflecting improved profitability, and upgraded its investment rating from "Neutral" to "Buy," based on 4 times the average price-to-book value for 2026-2027 (previously 3.5 times), raising the target price from HK$75 to HK$90. For HUA HONG SEMI, Citigroup raised its earnings per share forecasts for 2026 and 2027 by approximately 7% and 2%, respectively, reflecting solid prospects from domestic localization and power management applications, reaffirming a "Buy" rating, based on 5 times the average price-to-book value for 2026-2027 (previously 3.5 times), and raising the target price from HK$115 to HK$160. The bank also added both companies to its "90-Day Short-Term Positive View" list.

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

We need your insight to fill this gap
Leave a comment