SMIC Back To A: Redefinition Of Integrated Circuit Valuation Anchor

In the evening of June 1st, SMIC's application for listing on the science and technology board was accepted by the Shanghai Stock Exchange, marking the official opening of the chip giant's return to A.

The core innovation board IPO, SMIC intends to raise 20 billion yuan, plans to invest in the 12 inch chip SN1 project (8 billion yuan) underway in the south of the core industry, and reserve funds for advanced and mature R & D projects (4 billion yuan), with supplementary liquidity (8 billion yuan).

As the leading domestic foundry foundry, SMIC's every move has attracted much attention from the market. From a month ago, announced the return of the science and technology board, to the first quarter of the performance of red, and then get the two phase of the national big fund injection, SMIC is relying on one's own power to drive the entire A share IC board to rise.

For both the A share market and the integrated circuit industry, the return of SMIC is of great significance.

On the one hand, SMIC's 20 billion fundraising amount hit a new high of the science and technology board, nearly two times the amount of fund-raising of Second China's total numbers, and how to estimate the market expectations after the return to A. On the other hand, the intention of SMIC to accelerate R & D is obvious, especially in the context of Sino US trade friction. Space.

New valuation anchor

Since SMIC sent back the A news, the enthusiasm for SMIC and chip stocks has been continuously ignited. In less than a month, the shares of SMIC have risen by more than 22%.

In the case of A share investors, the return of SMIC means that A shares have another quality target. This is also one of the original intention of the establishment of the science and technology board to enable more investors to enjoy the bonus of the development of science and technology enterprises.

The consequent heated debate is about the valuation issue after the return of SMIC. The prospectus shows that SMIC intends to issue a stock of not more than 1 billion 686 million shares, raising the amount of 20 billion yuan, will be a real chip giant.

According to the June 2nd CIC closing price of HK $18.70, if additional 1 billion 686 million shares are issued, it will be able to raise about 28 billion 900 million yuan, and if it can be issued at a premium, the fund-raising will be even more substantial.

The market is also looking forward to the valuation performance of SMIC.

In June 2nd, many analysts of integrated circuit industry told reporters that the valuation material of SMIC is higher than that of Hong Kong stock. "SMIC International Valuation board needs to compare A shares with similar companies. At present, the general situation is that the valuation of A shares is higher than that of Hong Kong stocks, and the valuation of Ke Chuang plate is higher than that of the entire A shares. SMIC will enjoy a higher valuation in the science and technology innovation board. " One of the analysts said.

At the same time, the person stressed, "this is due to the scarcity of SMIC, and the chip leader is also worth the high valuation."

He Lizhong, an electronics analyst at Guoxin Securities, even called out the theory of "buying semiconductors, buying SMIC", and appealed for the return of Hong Kong stocks.

He Lizhong believes that the issuance of the science and Technology Board will enhance the valuation of SMIC in Hong Kong stocks. The company's reasonable PB valuation range is 2.5-2.6 times, corresponding to 23.4-24.4 Hong Kong dollar. Listing on the science and technology board is conducive to the return of the company's valuation to a reasonable valuation. The scarcity of the company and the importance of the core assets of the technology will be properly reflected in the mainland's capital market.

Apart from the discussion on the valuation of SMIC itself, another hot topic for market participants is the driving role of SMIC after the return of the SMIC.

"On the one hand, the return of SMIC has a demonstration effect to drive the high-quality chip enterprises of Hong Kong stock to return overseas or new listing and financing. On the other hand, as a large carrier class chip enterprise, SMIC will become an important anchor for technology stocks such as integrated circuits after the return of SMIC, and it has important reference to the industry boom, valuation and pricing." A broker who tracks the field of integrated circuits said.

The recent rise in A share chip stocks also seems to confirm the market's expectations. On the second day when SMIC announced its return, the A circuit board set off the tide of trading. After SMIC announced a quarterly report, the A semiconductor market also rose against the market. Then, SMIC gained billions of capital injection from the national large fund, and the stock price of the A stock chain changed.

"The return of SMIC has made the A share market a real core asset in the field of foundry industry. In the past, funds were forced to focus on core assets' shadow stocks', which may be broken in the future, and the fund's convergence to the core assets of the subdivision area is expected to become the mainstream. Caixin securities electronic industry analyst Yan pointed out.

The way of advanced process

Back to the development of SMIC itself, the wafer industry is a capital intensive industry. If it wants to further develop, it will need more capital.

Prior to May 15th, SMIC's south central China announced that it won $1 billion 500 million and 750 million US dollars in the National IC fund II and Shanghai integrated circuit fund II respectively. Most of the injection amount will be used as capital expenditure according to the development plan, and the development of high-end and fast-growing product flows has made the outside world look forward to the market prospect of its advanced technology application.

The SMIC will create more imagination for the market.

In its prospectus, SMIC said it hoped to meet the new working capital needs of capacity expansion through listing and raise capital structure and enhance risk tolerance.

"SMIC leveraged capital financing listing, indicating that the chip subcontracting industry will shift to the mainland, and will further accelerate the pace of domestic chip replacement. At the same time, from the point of view of raising funds, it will help companies speed up the research and development of advanced processes. The integrated circuit industry analysts pointed out.

SMIC said frankly that in the key indicators of advanced technology linewidth, there is still a certain gap between Chinese mainland enterprises and the leading enterprises in the field of production equipment and technical personnel.

Prospectus disclosure, the company successfully developed 0.35 micron to 14 nanometer technology nodes, the first generation of 14 nanometer FinFET technology in the fourth quarter of 2019 into mass production, the second generation of FinFET Technology (also known as N+1 process technology) platform has entered the stage of customer introduction, and synchronized research and development of the next generation of advanced technology.

However, taking TSMC in the same industry as an example, its 10 nanometer technology realized mass production as early as 2016, and the 7 nanometer mass production time was in 2018.

In the context of Sino US trade friction, the significance of the return of SMIC is even more significant.

Recently, the US Department of Commerce issued new regulations on export control to further restrict US companies' supply to HUAWEI or Hass semiconductor and other related enterprises, while wafer fabrication is the relatively weak link of the mainland's semiconductor industry chain.

"From this point of view, SMIC is the core asset of the mainland semiconductor industry chain. SMIC's return to A share financing advanced process is conducive to speeding up its advanced production line construction, increasing R & D investment, and further reducing the gap between TSMC and Samsung. With SMIC 14nm's mass production and expansion, mainland semiconductor's domestic substitution process It will also officially enter a new stage. Si Yan thinks.

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