Semiconductor Manufacturing International Corp

The company's capital structure is characterized by a debt-to-equity ratio of 0.51, indicating a moderate reliance on debt financing. Its liquidity position is mixed, with cash and equivalents of $5.35 billion, but free cash flow is negative at -$1.10 billion, driven by capital expenditures of -$1.91 billion. The current ratio of 1.6 suggests the company can cover its short-term liabilities, but the negative net cash position after subtracting total debt raises liquidity concerns.

Profitability metrics are weak compared to industry norms. Return on equity (ROE) is 0.36%, and return on assets (ROA) is 0.15%, both significantly below the industry median for ROE and ROA in the semiconductor sector. Gross margin is 13.7%, and operating margin is 0.14%, which are also below the industry median for gross and operating margins. These figures suggest the company is under pressure from cost inflation and pricing competition.

Geographically, the company's revenue is heavily concentrated in China, with a disclosed 85% of revenue derived from the region. Segment-wise, the company operates in a single business segment focused on wafer fabrication and packaging, with no material diversification across product lines or geographic regions. This concentration increases exposure to regional economic and regulatory risks.

The company's growth trajectory is mixed. Revenue in the latest period was $1.75 billion, and while the outlook for the current fiscal year is for a 5% increase in revenue, the next fiscal year is projected to see a 2% decline. This suggests a slowdown in demand for foundry services, potentially due to a global semiconductor inventory correction and reduced consumer demand.

Risk factors include liquidity constraints, as the company has negative net cash after subtracting total debt. The risk assessment indicates a medium liquidity risk and a low dilution risk. No dilution is expected in the near term, and the company has not issued new shares recently. However, the negative free cash flow and high capital expenditures suggest the company may need to raise additional capital in the future, which could introduce dilution risk.

Recent events include a Q4 2023 earnings report that highlighted a decline in wafer shipments and average selling prices. The company also announced plans to expand its 12-inch wafer production capacity in 2024. Analysts have issued a range of price targets, with a mean of $77.92 and a median of $86.00, indicating a mixed outlook among market participants.

Revenue grew 16.2% year-over-year to $9.3 billion in fiscal 2026, demonstrating strong top-line expansion.

Operating income surged 91.5% year-over-year to $1.1 billion, indicating significant improvement in operational efficiency.

Cash conversion ratio of 6.55 ranks as best-in-class within the semiconductor cohort, reflecting efficient cash management.

Analysts maintain a buy recommendation with a mean price target of $77.92, implying modest upside from current levels.

Free cash flow remains deeply negative at -$3.6 billion, signaling severe cash burn despite revenue growth.

Long-term debt increased to $11.6 billion in fiscal 2025, raising concerns about leverage and financial flexibility.

Operating margin of 0.14% falls significantly below the semiconductor cohort median of 2.52%, showing weak operational leverage.

Revenue $2.49B, +12,8% YoY; Operating income +39,2% YoY.

• ▍Revenue $2.49B, +12,8% YoY
• ▍Operating income +39,2% YoY
• ▍Net income +60,7% YoY
• ▍Net margin 6.9%

Revenue $2.38B, +9,7% YoY; Operating income +106,7% YoY.

• ▍Revenue $2.38B, +9,7% YoY
• ▍Operating income +106,7% YoY
• ▍Net income +28,9% YoY
• ▍Free cash flow −41,0% YoY
• ▍Net margin 8.1%

Revenue $2.21B, +16,2% YoY; Operating income +72,9% YoY.

• ▍Revenue $2.21B, +16,2% YoY
• ▍Operating income +72,9% YoY
• ▍Net income −19,5% YoY
• ▍Free cash flow +59,7% YoY
• ▍Net margin 6.0%

Revenue $2.25B, +28,4% YoY; Operating income +12 766,6% YoY.

• ▍Revenue $2.25B, +28,4% YoY
• ▍Operating income +12 766,6% YoY
• ▍Net income +161,9% YoY
• ▍Free cash flow +41,5% YoY
• ▍Net margin 8.4%

Revenue $2.21B; Operating income $214.5M.

• ▍Revenue $2.21B
• ▍Operating income $214.5M
• ▍Net margin 4.9%

Revenue $2.17B; Operating income $169.9M.

• ▍Revenue $2.17B
• ▍Operating income $169.9M
• ▍Net margin 6.9%

Revenue $1.90B; Operating income $87.1M.

• ▍Revenue $1.90B
• ▍Operating income $87.1M
• ▍Net margin 8.7%

Revenue $1.75B; Operating income $2.4M.

• ▍Revenue $1.75B
• ▍Operating income $2.4M
• ▍Net margin 4.1%

Revenue $9.33B, +16,1% YoY; Operating income +91,5% YoY.

• ▍Revenue $9.33B, +16,1% YoY
• ▍Operating income +91,5% YoY
• ▍Net income +39,0% YoY
• ▍Free cash flow +3,0% YoY
• ▍Net margin 7.3%

Revenue $8.03B, +27,0% YoY; Operating income −0,9% YoY.

• ▍Revenue $8.03B, +27,0% YoY
• ▍Operating income −0,9% YoY
• ▍Net income −45,4% YoY
• ▍Free cash flow +3,2% YoY
• ▍Net margin 6.1%

Revenue $6.32B, −13,1% YoY; Operating income −68,7% YoY.

• ▍Revenue $6.32B, −13,1% YoY
• ▍Operating income −68,7% YoY
• ▍Net income −50,4% YoY
• ▍Free cash flow −114,5% YoY
• ▍Net margin 14.3%

Revenue $7.27B, +33,6% YoY; Operating income +31,8% YoY.

• ▍Revenue $7.27B, +33,6% YoY
• ▍Operating income +31,8% YoY
• ▍Net income +6,8% YoY
• ▍Free cash flow −157,4% YoY
• ▍Net margin 25.0%