By Sherry Qin

Shares in China's largest chip maker rose sharply after it delivered record revenue and solid profit gains, reflecting the continued demand recovery for non-AI semiconductors after a global postpandemic inventory glut.

Semiconductor Manufacturing International Corp. shares in Hong Kong rose as much as 7.3% on Friday before paring gains to 3.2% at midday.

SMIC late Thursday reported a 34% rise in third-quarter revenue to $2.17 billion, in line with a FactSet consensus estimate and the company's guidance. Net profit climbed 58% to $148.8 million, growing for the first time in two years, but fell short of analysts' expectation of a near doubling from the year-ago figure.

Its gross margin came in at a better-than-expected 20.5%, which the management attributed to increased monthly capacity of its 12-inch production line that "further improved the product mix and increased the blended average sale price."

The solid results come as SMIC has steadily recovered in recent quarters, with customers more willing to restock and build up inventories for consumer electronics. The global semiconductor industry faced an industry-wide inventory glut last year after a pandemic-driven shortage of chips.

The Semiconductor Industry Association earlier this week said global semiconductor sales increased 23% to $166.0 billion in the third quarter from a year earlier.

As China's largest foundry with the most advanced fabrication technology in the country, SMIC is expected to capitalize on the localization of chip production against the backdrop of U.S. export curbs, DBS said in a recent note.

For the final quarter, the chip maker expects revenue to rise up to 2% sequentially, with gross margin in the 18%-20% range. Both forecasts are "slightly above FactSet consensus, so that explains the upward share-price reaction," Morningstar analyst Phelix Lee said.

SMIC's shares have advanced 40% so far this quarter after gaining 22% in the third quarter as investors cheered Beijing's aggressive stimulus policies in late September. Chinese policymakers are expected to unveil the highly-anticipated details of the fiscal package when the National People's Congress Standing Committee meeting concludes Friday.

Write to Sherry Qin at sherry.qin@wsj.com

(END) Dow Jones Newswires

November 08, 2024 00:14 ET (05:14 GMT)

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