Citi raised the target price for SMIC to 75 yuan, and the target price for Hua Hong was raised to 115 yuan

Citi released a report stating that SMIC (00981.HK) and Hua Hong Semiconductor (01347.HK) have their Q4 2025 financial reports generally in line with company guidance, but the outlook for Q1 2026 is slightly below expectations. Both companies expect that the domestic demand for semiconductors in China and AI-driven opportunities will support growth prospects, but they face margin pressure from increased depreciation and intensified competition.

The report indicates that SMIC forecasts flat revenue for Q1 2026, with a gross margin maintained at 18% to 20%, and capacity utilization will remain high, with capital expenditures in 2026 expected to be on par with 2025. Hua Hong Semiconductor also guides for flat revenue in Q1 2026, expected to reach USD 650 million to 660 million, with a gross margin of 13% to 15%.

The firm noted that both companies view AI and domestic substitution demand as key drivers, and both will benefit from the localization process of the Chinese supply chain and the diversified development of end-market demand. The target price for SMIC has been raised from 53 yuan to 75 yuan, with a rating of "Neutral"; the target price for Hua Hong Semiconductor has been raised from 105 yuan to 115 yuan, with a rating of "Buy."