SMIC Q3 revenue increased by 9.9% year-on-year, net profit surged by 43.1%, and gross margin rose by 4.8 percentage points quarter-on-quarter | Financial Report Insights

The latest financial report released by SMIC shows that in the third quarter, revenue reached 17.162 billion yuan, a year-on-year increase of 9.9%, with a gross profit margin of 25.5%, which significantly increased by 4.8 percentage points quarter-on-quarter. The capacity utilization rate climbed to 95.8%, approaching full production status.

Financial Performance:

Q3 revenue of 17.162 billion yuan, a quarter-on-quarter increase of 6.9%, and a year-on-year increase of 9.9%; revenue for the first three quarters was 49.51 billion yuan, a year-on-year increase of 18.2%;

Q3 gross profit margin of 25.5%, a significant increase of 4.8 percentage points quarter-on-quarter; gross profit margin for the first three quarters was 23.2%, a year-on-year increase of 5.6 percentage points;

Q3 net profit attributable to shareholders of 1.517 billion yuan, a year-on-year increase of 43.1%; net profit attributable to shareholders for the first three quarters was 3.818 billion yuan, a year-on-year increase of 41.1%;

Capacity utilization rate rose to 95.8%, an increase of 3.3 percentage points quarter-on-quarter, indicating strong demand.

The financial report also stated that the guidance provided by SMIC's management for the fourth quarter indicates that revenue will remain flat to increase by 2% quarter-on-quarter, with a gross profit margin of 18%-20%.

This means that with a capacity utilization rate already as high as 95.8%, the company expects the revenue growth rate in the fourth quarter to slow significantly, while the median gross profit margin of 19% will decline by about 6 percentage points compared to the 25.5% in the third quarter.

Product Structure Exposes Structural Pressure

From the application field perspective, the biggest change in the third quarter was that the proportion of consumer electronics jumped from 41.0% to 43.4%, while the proportion of smartphones decreased from 25.2% to 21.5%.

Although this structural change helped the company maintain its capacity utilization rate, the unit price and gross profit margin in the consumer electronics sector are typically lower than those of high-end smartphone chips, which may be one reason for the low gross profit margin guidance in the fourth quarter.

The proportion of the industrial and automotive sectors increased from 10.6% to 11.9%, which is one of the few bright spots. This sector typically has longer product cycles and more stable profit margins, but the 11.9% share is still relatively small and insufficient to become the core driver of performance growth.

Q3 Capital Expenditure Increased by 26% Quarter-on-Quarter

Operating cash flow for the third quarter was 6.39 billion yuan. Although this represents a year-on-year decrease of 29.1%, it still maintained a positive inflow. However, cumulative capital expenditure for the first three quarters reached 42.199 billion yuan, far exceeding the operating cash flow of 12.288 billion yuan during the same period.

More notably, capital expenditure for the third quarter alone was 17.065 billion yuan, a quarter-on-quarter increase of 26%.

At the end of the third quarter, the company's cash and cash equivalents amounted to 28.363 billion yuan, a significant decrease of 19.666 billion yuan from the beginning of the year, representing a decline of 41%.

During the same period, short-term borrowings increased from 1.07 billion yuan to 6.14 billion yuan, while long-term borrowings remained high at 56.25 billion yuan