Q4 performance is less than expected, Dahon decline
SMIC Q4 earnings release February 8, showed that for the three months ended December 31, 2017, the company revenue 787 million US dollars, down 3.4%, growth of 2.3%; the company owner profit 47.718 million US dollar, a year-on-year decrease of 54.1% and a quarter-on-quarter increase of 84.2%; earnings per share of US $ 0.01.
The continuous decline in gross profit margin was the major reason for the significant decrease in profit for the period, with gross margin of 18.9% for the fourth quarter of 2017 from 23.0% in the third quarter of 2017 and 30.2% in the fourth quarter of 2016.
From the production point of view, the fourth quarter compared with the third quarter, there is not much difference in the third quarter, foundry capacity of about 4480,000, while the fourth quarter of about 442,800, a difference of 5,200 pieces. From the shipment of wafer data, the fourth quarter of 112.48 million, 4.5% higher than the third quarter, capacity utilization has also picked up, but the profit is still down from the third quarter, mainly due to increased competition in the industry and the company's product portfolio Adjustment.
The market apparently believes that SMIC's performance is less than expected.Marine firms cut its rating on February 8. SMIC even said that its fiscal first-quarter forecast could make 2018 a terrible year for transition, adding SMIC International target price cut 16% to HK $ 9.50 with rating on hold, although SMIC expects first-quarter gross profit margin to be 25-27%, Yamato warned that the figure could be as low as 10-12%.
But from another perspective, the transition period of SMIC may only wait for inflection point.
Ample cash, 28 nanometer technology force
In terms of funds, although the company's profit dropped, its capital flow remained abundant during the reporting period, with cash and cash equivalents of US $ 1.83 billion, an increase of 64.25% from the previous quarter, current assets of US $ 4.169 billion, current liabilities of approximately US $ 1.907 billion, cash ratio From 0.6 times in the third quarter to 1 times, the current ratio increased from 1.9 times to 2.2 times, quick ratio increased from 1.9 times to 1.5 times, showing the company cash flow sufficient.
In addition, the company 28-nanometer wafer sales in the proportion of gradual increase.SMC last year advanced research and development in the advanced research and development.In the first half of last year, SMIC revenue from 28 nm has grown to total wafer Revenues of 5.8%, representing an increase of 13.8 times over the same period in 2016. As of the fourth quarter, accounting for 28% of the final revenue accounted for more than 10%, reaching 11.3%, or nearly 30%.
CEO, Zhao Haijun and Liang Mingsong said annual revenue grew 6.4% YoY in FY17, in line with the growth rate of the foundry industry. The company successfully completed a 28-nanometer technology product portfolio this year while continuing to expand its technology platform and diversify For example, revenue from automobile and industry in 2017 doubled from 2016 revenue.
SMIC is currently in the transitional transition period, the previous three years, the company relies on high capacity utilization to promote revenue and earnings double growth, and now the semiconductor industry rely on the dividend era has slowly passed, only the more advanced technology and process Can promote the rapid growth of enterprises,
Tianfeng Securities said in its research report that due to the continuous R & D of advanced processes, the expenses related to SMIC are allocated to SMIC Northern IC Co., Ltd. (the Company owns most of the interest), so the net profit attributable to the listed company At $ 47.72 million, a quarter-on-quarter increase of 84.2%, actually exceeding expectations for its net profit. "The revenue growth was in line with expectation and above the median, which means SMIC is operating normally on a sequential basis and the customer structure is stable.
Zhitong Finance aPP also believes that from the annual growth point of view, SMIC's performance and the industry average, its performance is not related to bearish analysts predict so bad, but the ring made progress in the current Hong Kong stocks The stage of drastic adjustment is instead an opportunity to lure high-quality Chinese technology stocks.
Catch up with the advanced process
From a strategic point of view, SMIC's pursuit of advanced manufacturing process has not stopped.
First, the sharp increase in cash and cash equivalents, which also includes the remaining funds raised during the reporting period, the reporting period, the company net financing was 847 million US dollars, while the net debt to equity ratio decreased from 23.5% in the third quarter To 11.8%. That is to say, most of the funds will go into production research.
Second, in addition to the strategic transformation, SMIC Leong Mengsong joined since the SMIC layout of advanced technology moves frequently.From the financial statements of SMIC in the fourth quarter of 2017 capital expenditure of 498.7 million yuan, compared with the third quarter of 2017 451.1 million yuan.Microsoft International said that in 2017 the capital expenditures for the operation of the wafer fab 2,454.4 million yuan, of which 948 million yuan and 5.105 billion yuan for the majority-owned Beijing 300mm wafer fab and Shenzhen 300mm wafer Capacity expansion of the plant The capital expenditure for the operation of non-fabs in 2017 was $ 29.5 million, mainly for the construction of employee living area.
As a result, R & D expenditures and capacity expansion expenditures for advanced processes, as well as substantial increases in depreciation expense, fed back to Q4's financial performance as the gross profit margin declined.
Furthermore, SMIC recently gained capital from National Integrated Circuit Fund and Shanghai IC Fund to bring more capital to the company, and SMIC invested 10.22 billion U.S. dollars to accelerate the development of 14-nanometer technology.
Relevant announcement said that the National IC Fund, Shanghai IC Fund will be held by SMIC subsidiary SMIC South. SMIC South Main IC manufacturing wafer, pin measurement and bump manufacturing business for SMIC 14 SMIC, large fund, Shanghai IC Industry Fund respectively 1.5435 billion US dollars, 946.5 million US dollars, 800 million US dollars to SMIC South. After the injection of capital, SMIC South registered capital From US $ 210 million to US $ 3.5 billion. SMIC's ownership of the company will be reduced from 100% to 50.1%. National IC Fund and Shanghai IC Fund will hold 27.04% and 22.86% respectively.
Observing its peers, TSMC, is able to earn the maximum profit in the industry precisely because of its high gross margin in advanced technology and ASP. SMIC has stepped up the pace of advanced technology, coupled with strong support from the National Large Fund , Liang Mingsong joined the powerful help, although for the moment in the transition phase SMIC will erode some of the profits, gross profit margin, capacity utilization rate to some extent decline, but in the long run, earnings growth performance must also be based on capital and R & D investment Based on.
Tianfeng Securities believes that the most important indicator of the inflection point of the observing company is the advanced manufacturing process. That is, 14 nanometer technology began to contribute revenue to the company, which may be an important indicator of the company's inflection point.
It should be noted that the 28nm process to upgrade to the desired level and the risk of 14nm production is expected in 2019, 28nm process improvement is completed, the follow-up to enhance the level of technology will be significantly accelerated, SMIC can win the technology Scramble to see how the follow-up performance.