Semiconductor Manufacturing Int'l Earnings: Stock Still Expensive After Bearish Management Comments

Our fair value estimate on Semiconductor Manufacturing International Corporation, or SMIC, stays at HKD 15.60 per share after factoring in the latest management guidance. On top of bearish management commentary on the next 12 months, we view the stock to be overvalued as we believe procurement risks are trending higher, and the firm’s capital spending may take longer to bear fruit. The key upside risk to our fair value is Chinese equipment makers making breakthroughs faster than anticipated, which would have mitigated risks of losing access to advanced tools.