Guosen: Semiconductor Manufacturing International Corporation (00981) 3Q26 revenue and gross margin both exceeded the upper end of guidance; maintain "Outperform" rating.

Guosen released a research report stating that based on Semiconductor Manufacturing International Corporation's (00981) 3Q26 results and 4Q26 guidance, thanks to ASP increases and capacity utilization remaining at a high level, it raised the company's net profit attributable to shareholders for 2026-2028 to US$1.488 billion/US$1.726 billion/US$2.021 billion (previous values: US$1.328 billion/US$1.561 billion/US$1.816 billion), corresponding to PE of 36x/31x/26x based on the stock price on November 12, 2026, and maintained the "Outperform" rating. Guosen's main views are as follows: 3Q26 revenue and gross margin both exceeded the upper end of guidance; 4Q26 revenue expected to grow 4-6% QoQ The company achieved sales revenue of US$3.190 billion in 3Q26 (YoY +33.9%, QoQ +6.1%), exceeding the upper end of guidance (2%-4% QoQ growth) and setting a new quarterly revenue high, mainly because customer demand for AI-related chips was stronger than originally expected; wafer revenue accounted for 95.9% of total revenue. Gross margin rose to 29.9% QoQ (YoY +7.9pct, QoQ +4.6pct) due to higher capacity utilization and changes in product mix, exceeding the upper end of guidance (26%-28%). Net profit attributable to shareholders was US$428 million (YoY +123.4%, QoQ -10.6%). 4Q26 revenue is expected to grow 4%-6% QoQ, with the off-season not being weak, and gross margin of 26%-28%. Wafer sales ASP increased QoQ; capacity utilization rose YoY and QoQ to 97.3% The company shipped 3.03 million 8-inch equivalent wafers in 3Q26 (YoY +21.4%, QoQ +5.7%), with capacity utilization at 97.3% (YoY +1.5pct, QoQ +3.6pct). Within wafer revenue, the contribution from 12-inch wafers rose to 78.9%, while 8-inch wafers contributed 21.1%; the average wafer price per 8-inch equivalent wafer rose QoQ to US$1,008 (YoY +11.2%, QoQ +1.8%). The company's 3Q26 capital expenditure was US$1.094 billion (YoY -54.3%, QoQ -40.4%), and monthly 8-inch equivalent wafer capacity increased by 20,000 wafers from the end of 2Q26 to 1.117 million wafers. In the third quarter, industrial and automotive revenue continued to more than double YoY, while smartphone revenue declined YoY and QoQ By application, in the third quarter wafer revenue grew YoY across all downstream segments except smartphones, which fell 10.3% YoY; industrial and automotive, computers and tablets, connectivity and wearables, and consumer electronics grew 118.8%, 62.4%, 26.5%, and 26.2% YoY, respectively. QoQ, computers and tablets, industrial and automotive, and connectivity and wearables grew 26.2%, 25.9%, and 18.7%, respectively, while smartphones and consumer electronics declined 9.0% and 1.2%, respectively. By region, the share of third-quarter revenue from China rose QoQ to 90.8%, the share from the Americas was 7.8%, and the share from Eurasia was 1.4%. Risk warnings: slower downstream demand; capacity expansion falling short of expectations; risk of heightened international tensions.