DBS Bank lowered the target price for SMIC to 87.4 yuan, maintaining a "Buy" rating with revaluation potential

The research department of DBS Group published a report stating that SMIC (00981.HK), as China's leading 7nm wafer foundry, possesses the most extensive 12-inch capacity and the most advanced local logic process capabilities. It is expected to benefit the most from the supply chain's shift towards "local design, local manufacturing."

The bank believes that in the short term, SMIC's profit margins are primarily affected by depreciation rather than demand constraints. It currently expects profit margins to remain at a level of tens of percent this year, with potential upside mainly coming from improvements in new capacity yield and utilization rates, as well as product mix adjustments, rather than widespread price increases. DBS maintains a "Buy" rating on SMIC, believing it has valuation re-rating potential, with the target price lowered from HKD 88.8 to HKD 87.4, and has reduced the earnings forecasts for 2026 and 2027 by 10% and 12% respectively to reflect the short-term pressure on profit margins