Semiconductor Manufacturing International Corporation (NYSE: SMI) is one of the leading semiconductor foundries in the world and the largest and most advanced foundry in mainland China. SMI provides integrated circuit (IC) foundry and technology services on process nodes from 0.35 micron to 28 nanometers. Headquartered in Shanghai, China, SMI has an international manufacturing and service base.
On November 14th, the company announced results for the quarter ended September 30, 2017. The company delivered another quarter of muted performance. Though it was in line with management’ guidance and grew 2.5% quarter over quarter. The sequential growth came mainly from the broad-based recovery in smartphone-related shipments. By process node, 28nm wafer revenue increased 38.9% quarter over quarter, and 0.18um grew 33.8% quarter over quarter.
Results Vs. Original Guidance:
Also, the Q4 guidance from management remained muted with revenue target between $777.4M to $792.8M (as against an expectation of $830.05M); gross margin, 18% to 20%; non-GAAP operating expenses, $204M to $210M.
Following this, analysts tracking the stock have revised their ratings, and subsequently, a number of investors and hedge funds have recently modified their holdings of the stock. On Nov 16th Jefferies, downgraded Semiconductor Manufacturing from Buy to Hold and suggested a median price target of $5.75. Latest analyst standings on the stock are 1 Buy and 3 Underperform.
In three years preceding 2017, SMI had grown revenue and profitability on high utilization, and in these two years, it entered a period of transition as it prepares its technology and facilities for the next stage of growth. In the near-term, the company’s growth drivers include: 28nm, flash memory, fingerprint sensors, and power management ICs. In the long-term, it works to speed up execution and focus its resources on key technology platforms, in which it strives to be the “foundry-of-choice.”
The management is focusing on its investment into strategic areas that support the long-term growth, profitability, and viability of its business. With its strengthened team, focused direction, and strong position in China, SMIC is expected to execute on its targets and benefit from the opportunities in the IC market.
About the company: Semiconductor Manufacturing International Corporation (NYSE: SMI; SEHK: 981) is one of the leading semiconductor foundries in the world and the largest and most advanced foundry in mainland China. In China, SMI has a 300mm wafer fabrication facility (fab) and a 200mm fab in Shanghai; a 300mm fab and a majority-owned 300mm fab for advanced nodes in Beijing; 200mm fabs in Tianjin and Shenzhen; and a majority-owned joint-venture 300mm bumping facility in Jiangyin; additionally, in Italy SMI has a majority-owned 200mm fab. SMIC also has marketing and customer service offices in the U.S., Europe, Japan, and Taiwan, and a representative office in Hong Kong.
Market potential and drivers: The company’s business and marketing risk profile are expected to leverage on Rapid Growth of China IC Market and the incredible rise of IoT, Internet of things in our everyday life.
The offtake is expected to be driven by significant Domestic China IC Consumption (Domestic China IC consumption accounts for 2/5 of worldwide consumption) with Forecast IC purchases by local brands ~ $83B in 2017
Recent announcements:
In September, SMI announced the successful fabrication with the first domestically designed manufactured MBIoT in China with ZTE. This MBIoT can be widely used in smart meters, shared bikes, smart applications, smart CD and others
It also announced the availability of the low power platform for IoT using its 55 ultra-low power processes. The platform is optimized for functionality common in IoT designs such as voice recognition, face detection, and sensor fusion.
In addition, SMI announced with Chengdu Analog Circuit Technology, the availability of analog IP solution using 55 nanometers, eFlash technology engineered for very low power IoT applications that need low [indiscernible] and extended battery life.
3rd Quarter 2017 Financial Results:
Revenue and Profitability:
- In third quarter 2017, SMI’s revenue was $770 million, an increase of 2.5% quarter-over-quarter, mainly due to the increase of wafer shipment. Gross margin was 23%, a decrease of 2.8 percentage points primarily due to lower fab utilization which was 83.9%. Non-GAAP operating expenses were $184 million. Profit for the period attributable to SMIC was $26 million, while non-controlling interest was $5 million.
Liquidity:
- At the end of third quarter of 2017 cash on hands including other financial assets were $1.7 billion. Gross debt to equity ratio was 52%, and net debt to equity ratio was 24%. Regarding cash flow, SMIC generated $420 million of cash from operating activities in the third quarter.
Guidance for the fourth quarter:
Long-term vision: SMI’s management positions itself as the long-term viable foundry partner of choice in China. It hopes to establish comprehensive technology roadmap with its customers on mature and advance nodes. To meet some of the increased future demands of customers, it must accelerate execution and narrow down technology gap.
Key risk factors and potential stock drivers:
The company continues to be in its transition period for the second year and the positive results of the management team rebuild, refocus on expansion and technology is critical for its business risk profile.
The company has had experienced margin erosions due to change in product mix and a sharp increase in R&D spending. Therefore, management’s ability to ramp up profitability while sustaining revenue growth would be a critical stock sensitivity factor for the company.
The company has had incurred significant CapEx in the past, causing a burden on its overall liquidity and financial flexibility. The trend in CapEx cycle (along with possible funding pattern) would be a stock sensitivity factor over the medium term.
SMI’s business is highly competitive. It faces significant competition that it anticipates will continue to intensify. If the company is not able to maintain or improve its market share, its business could suffer.
Stock Chart:
- On Friday, November 24th, 2017, SMI closed at $7.59 (down 1.43%) on an above average volume of 686,837.00 shares exchanging hands. Market capitalization is $7.09 billion. The current RSI is 52.47
- In the past 52 weeks, shares of SMI have traded as low as $4.49 and as high as $9.14
- At $7.59, shares of SMI are trading above its 50-day moving average (MA) at $6.77 and above its 200-day moving average (MA) at $6.01.
- The present support and resistance levels for the stock are at $7.46 & $7.70 respectively.
Welcome to Traders News Source
Our track record speaks for itself…
Traders News Source recent profiles and track record, 487% in verifiable potential gains for our members on 3 small cap alerts alone! These are just three examples from over two dozen winners this year.
January 31st, 2017 (NASDAQ: HIMX) opened at $5.10/share and hit a high of $9.68/share March 24th, 2017 for gains of 89% within 60 days- http://finance.yahoo.com/news/himax-technologies-review-4q-2016-130000319.html
May 23rd, 2016- (NYSE: XXII) opened at $.87/share hit a high of $3.03/share so far our member potential gains- 248% – http://mailchi.mp/tradersnewssource/updates-5-of-our-profiles-for-212-400-and-whats-coming-next?e=[UNIQID]
October 31st, 2017 (NASDAQ: PYDS) Although we have been covering this security for over a year, our recent coverage October 31st, 2017 opened at $1.45/share hit $4.10 within three days for gains of over 150%- http://mailchi.mp/tradersnewssource/update-pyds-back-in-the-value-zone-with-news-out?e=[UNIQID]
So, if you’ve been on the fence, perhaps it’s time to start doing some research and verify our numbers for yourself. We are constantly raising the bar and separate ourselves from the rest of the small-cap newsletters as the best in business.
We know with a large following comes a large responsibility as we have everyone from institutional investors to the beginner following our profiled securities in our newsletter. This is something we take very seriously always seeking small cap growth companies that have both near and long-term potential for our members.
Big Opportunities Trading Small Cap Stocks
***Get our small cap profiles, special situation and watch alerts in real time. We are now offering our VIP – SMS/text alert service for free, simply text the word “Traders” to the phone number “25827” from your cell phone***
Disclaimer
Traders News Source is a wholly owned subsidiary of Traders News Source LLC, herein referred to as TNS LLC.
Traders News Source has not been compensated for this report by anyone and the opinions if any are that of the author Vikas Agrawal, CFA. Author’s Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I, wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in the article.
This web site, published by TNS LLC, and is an investment newsletter that is built on the premise of assisting individual investors in learning about investing. Our goal as publishers of financial information is to provide research and analysis of investments to our subscribers. TNS LLC does not give buy or sell recommendations. We do purchase distribution rights from analyst, financial writers and bloggers for a fee that may be licensed to issue price targets and recommendations. Furthermore, we encourage you to speak to a licensed professional prior to making an investment in any type of publicly traded security.
We do sell advertising to other companies including brokerage firms, web sites, publicly traded issuers, investor relations firms, and investment publications, among others. TNS LLC makes no warranty as to the policies of these organizations, and in no way endorses their offers, services, or the content of their advertisements.
When an advertiser is a publicly traded company or a third party acting on behalf of a public company, we fully disclose all compensation in the email advertisement. Such disclosure is included in a disclosure statement in each of the advertisements sent via email.
17B Disclosure
Our reports/releases are a commercial advertisement and are for general information purposes ONLY. We are engaged in the business of marketing and advertising companies for monetary compensation. Never invest in any stock featured on our site or emails unless you can afford to lose your entire investment. The disclaimer is to be read and fully understood before using our services, joining our site or our email/blog list as well as any social networking platforms we may use.
PLEASE NOTE WELL: TNS LLC and its employees are not a Registered Investment Advisor, Broker Dealer or a member of any association for other research providers in any jurisdiction whatsoever.
Release of Liability: Through use of this website viewing or using you agree to hold TNS LLC, its operator’s owners and employees harmless and to completely release them from any and all liability due to any and all loss (monetary or otherwise), damage (monetary or otherwise), or injury (monetary or otherwise) that you may incur. The information contained herein is based on sources which we believe to be reliable but is not guaranteed by us as being accurate and does not purport to be a complete statement or summary of the available data. TNS LLC encourages readers and investors to supplement the information in these reports with independent research and other professional advice. All information on featured companies is provided by the companies profiled, or is available from public sources and TNS LLC makes no representations, warranties or guarantees as to the accuracy or completeness of the disclosure by the profiled companies. None of the materials or advertisements herein constitute offers or solicitations to purchase or sell securities of the companies profiled herein and any decision to invest in any such company or other financial decisions should not be made based upon the information provide herein. Instead TNS LLC strongly urges you conduct a complete and independent investigation of the respective companies and consideration of all pertinent risks. Readers are advised to review SEC periodic reports: Forms 10-Q, 10K, Form 8-K, insider reports, Forms 3, 4, 5 Schedule 13D.
TNS LLC is compliant with the Can Spam Act of 2003. TNS LLC does not offer such advice or analysis, and TNS LLC further urges you to consult your own independent tax, business, financial and investment advisors. Investing in micro-cap and growth securities is highly speculative and carries an extremely high degree of risk. It is possible that an investor’s investment may be lost or impaired due to the speculative nature of the companies profiled.
The Private Securities Litigation Reform Act of 1995 provides investors a ‘safe harbor’ in regard to forward-looking statements. Any statements that express or involve discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, goals, assumptions or future events or performance are not statements of historical fact may be “forward looking statements”. Forward looking statements are based on expectations, estimates, and projections at the time the statements are made that involve a number of risks and uncertainties which could cause actual results or events to differ materially from those presently anticipated. Forward looking statements in this action may be identified through use of words such as “projects”, “foresee”, “expects”, “will”, “anticipates”, “estimates”, “believes”, “understands”, or that by statements indicating certain actions & quote; “may”, “could”, or “might” occur.
Understand there is no guarantee past performance will be indicative of future results. In preparing this publication, TNS LLC has relied upon information supplied by its customers, publicly available information and press releases which it believes to be reliable; however, such reliability cannot be guaranteed. Investors should not rely on the information contained in this website. Rather, investors should use the information contained in this website as a starting point for doing additional independent research on the featured companies. The advertisements in this website are believed to be reliable, however, TNS LLC and its owners, affiliates, subsidiaries, officers, directors, representatives and agents disclaim any liability as to the completeness or accuracy of the information contained in any advertisement and for any omissions of materials facts from such advertisement. TNS LLC is not responsible for any claims made by the companies advertised herein, nor is TNS LLC responsible for any other promotional firm, its program or its structure.
