Morgan Stanley lowered its target price for SMIC (00981) to HK$7.5 from HK$9.9, and downgraded its rating to "underweight " from "equal-weight".
The research house said GlobalFoundries' exit from the leading edge market saw some enthusiasm from investors with regards to SMIC, as it is one of the few foundries that is still committed to developing sub-14nm nodes.
However, Morgan believes this will see its financial leverage further increase, given the required capex to reach 28nm/14nm capacity. It also expects the company's utilization to decline in coming quarters, given weak China consumer demand.
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