On June 30, CMB International released a report initiating coverage of SMIC H shares with a 'Buy' rating and a target price of HKD 110. The report highlights that SMIC is China's core wafer manufacturing platform, combining domestic scale, a wide range of mature and specialized process coverage, advanced logic capabilities, and deep involvement in China's fabless ecosystem. The investment perspective is currently shifting from capacity expansion to capacity conversion (transforming previous capital expenditures into qualified 12-inch output), maintaining high capacity utilization, improving product mix to drive average selling price increases, and the full ownership of SMIC North (SMNC) driving overall profit growth. The firm forecasts that with high capacity utilization, favorable product mix improvements, and the gradual capacity conversion of existing 12-inch fabs, SMIC's revenue is expected to grow by 22%, 14%, and 12% in 2026, 2027, and 2028, respectively. The company's guidance for the next fiscal quarter indicates a sequential revenue growth of 14% to 16% and a gross margin of 20% to 22%, confirming stronger shipment volumes, better average selling prices, and faster release of high-value capacity. Additionally, AI demand is supporting its broader chip product supply, while domestic demand will continue to drive local customers towards domestic foundry capacity.