On the evening of May 12, SMIC (688981.SH) released a first quarter report.

According to the financial report, the company's operating income in the first quarter was 11.854 billion yuan, an increase of 62.56%year-on-year; net profit was 2.843 billion yuan, an increase of 175.49%year-on-year, and it was expected that the revenue in the second quarter would continue to increase by 1%-3%. Compared with 2021, the company's gross profit margin increased from 29.31%to 41.17%, and the net interest rate continued to remain above 30%.

As we all know, SMIC's main business is wafer foundry, mainly engaged in semiconductor wafer manufacturing and production. It is important to explain that the wafer foundry is one of the highest technical content in the semiconductor industry chain, and SMIC is mainly engaged in manufacturing rather than design links.

What are the reasons behind the company's performance?

The company explained that "mainly due to the company's planning for the past six months, and around the market gap, it further strengthened cooperation with the banned cooperation with global customers and suppliers, and promoted the production capacity allocation and adjustment early, and promoted the construction capacity in an orderly manner."

In fact, since 2020, the supply chain interruption has been affected by the epidemic, the chip has continued to be out of stock, and the downstream consumer electronics and new energy vehicles are highly prosperous and the demand for chips has skyrocketed. Therefore, the semiconductor industry, especially SMIC, The circular track continues to be hot.

In the first half of 2022, despite the new crown epidemic and international conflicts, with the increase in demand in new energy vehicles, display panels and industrial fields, the lack of semiconductor manufacturing capacity was intensified in the short term. According to the latest data from the US Semiconductor Industry Association, the global chip market in the first quarter of 2022 increased by 23%year -on -year.

In this context, the company's outstanding performance is also reasonable.

However, why is one side soaring, but the company's stock price is endless?

First, according to the introduction, the company's capital expenditure in the first quarter was about 5.5 billion yuan, and the annual capital expenditure was expected to be about 320.05 billion yuan, a year -on -year growth rate of about 11%. However, this growth rate is significantly lower than TSMC, Samsung, and Intel, which means that it is not as good as the leading company in production capacity.

Second, the gap between the process. The breakthrough of SMIC from 28nm to 14nm took four years, but the 7nm technology SMIC has not yet been able to break through, but the income ratio of TSMC 7nm products has reached 31%in 2021. The 5nm products account for It is also as high as 19%, and the revenue of 28nm and below the year is as high as 75%.

Third, according to predictions, global smartphone shipments in 2022 will decrease by 200 million units, mainly due to the Chinese market of Chinese manufacturers, which triggers the market's concerns about the decline in demand for the construction of factories to increase production capacity.

Guohai Securities believes that in the short term, SMIC, as a leader in domestic wafer foundry, has been completed and put into operation with new projects such as Beijing and Lingang, such as the company's high prosperity, and the company's growth is high. But in the long run, in the near future, the wafer foundry may have the possibility of reversal of supply and demand.

German semiconductor manufacturer Ying Feiling predicts that with the improvement of this summer, the shortage of its core products will end next year.

UMC said that after 2023, the 28nm process production capacity may be too required. Although the company emphasizes the large scale of 28nm downstream application and the possibility is relatively small, it also makes the market add another layer of doubts, and the view of the wafer foundry industry is also cautious and conservative.

Moreover, from the historical performance, this concern is not unreasonable.

In 2018 and 2019, the company's net profit was 747 million yuan and 1.794 billion yuan, but the non-net profit was -617 million yuan and -522 million yuan, respectively.

In other words, as a catch -up party, once the market view changes, the company's profitability will present periodic fluctuations.

In addition, unlike TSMC, SMIC's free cash flow has been negative for a long time, and huge capital expenditures have not improved the market share and product process level.

Of course, being included in the entity list, as well as frequent personnel changes and resignation of executives, is also an important reason for the outside world to worry about SMIC.

Finally, talk about the company's market outlook.

As far as valuation is concerned, the company's price -earnings ratio and municipal net ratio are only 27 times and 3 times, respectively, which belongs to the level with low historical points. However, in the past two years, the company's stock price has not risen with its performance, but has decreased from the highest 95 yuan/yuan to the current 43 yuan/nearly, which shows that the market's positioning of SMIC's international international international It is not a growth stock but more like cyclical stocks.

In this sense, the inflection point of the company's stock price may not depend on valuation, nor does it depend on performance, but when the company's market competitiveness ushered in truly transformation.