SMIC Sales May Grow 30% in 2022, but Higher Capital Expenditure and Looming Risks Limit Upside. New FVE HKD 21.

We raise our fair value estimate on Semiconductor Manufacturing International, or SMIC, to HKD 21 per H-share, equating to 1.1 times 2022 price/book ratio. The positive impact from increased operating profit estimates is mostly offset by higher capital expenditure assumptions from 2022-24. The stock appears fairly valued, as there are few fresh details on new capacities and we are concerned with a potential oversupply in 2024. Even though the "unverified list" that the U.S. just announced does not affect SMIC directly, we believe it signals the U.S. has not materially softened its stance on Chinese companies.