SMIC plans to raise 20 billion yuan to create the most scientific and technological innovation board in 18 days

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 SMIC plans to raise 20 billion yuan to create the most scientific and technological innovation board in 18 days


At about 5:00 p.m. on June 19, according to the announcement issued by the municipal Party committee of the Shanghai Stock Exchange on the science and technology innovation board, it agreed to the initial application of SMIC in the science and technology innovation board.

SMICs meeting marks the first red chips to be listed on the technology innovation board. It is worth noting that it took only 18 days for the company to receive the listing application materials and pass the meeting. This time, SMIC will raise 20 billion yuan to land on the science and technology innovation board, the most in the history of science and Technology Innovation Board since its opening.

Coincidentally, on the eve of SMIC International Conference, Geely Automobile, which is listed in Hong Kong stock market, also announced its intention to be listed on science and technology innovation board. Like SMIC, Geely is also a red chip company seeking to be listed on the scientific and technological innovation board for the second time.

H shares of SMIC are outstanding

In the audit, the issues raised by the listing committee to SMIC mainly include the market positioning and future application prospects of more advanced process products such as 14nm and 28nm, whether the orders in hand of 28nm process wafer foundry constitute loss orders, and whether the relevant losses are expected.

Looking back on SMICs road of breaking through the scientific and technological innovation board, it only took 45 days from the date of official announcement to the companys meeting.

On the evening of May 5, SMIC Hong Kong stock announced that it plans to issue no more than 1.686 billion shares in science and technology innovation board, raising funds for 12 inch chip SN1 project, advanced and mature technology research and development project reserve funds and supplementary working capital.

On June 1, the companys application for listing on science and technology innovation board was accepted by Shanghai Stock Exchange. On the evening of June 7, SMIC replied to the first round of questions, totaling 29. On June 10, three days later, the company received the notice of the meeting from the municipal Party Committee on the science and technology innovation board.

Recently, the H-share market of SMIC has gained an eye-catching performance, with the highest increase of more than 20% last week. On the eve of SMICs meeting on the science and technology innovation board, the Bank of international issued a report to support the companys share price performance. Recently, Goldman Sachs published a report that it maintained its buy rating on SMIC and raised its target price for the next 12 months by HK $23 from HK $22.

Public information shows that SMIC was founded in 2000 and provides 0.35 u03bc m to 14 nm wafer foundry and technical services to global customers. In 2019, SMIC accounted for about 4.87% of the global wafer foundry market, ranking fifth in the world. After 2010, the company strategically abandoned memory production and mainly produced logic chips.

According to the analysis of Shenwan Hongyuan electronic team, from the perspective of the global wafer foundry industry, TSMC is at least one to two years ahead of its peers in advanced process nodes, and its market share has been more than 50% all the year since 2014. In the second tier, Samsung and grofangde accounted for only about 10% of the market, while SMIC international accounted for about 5% for a long time. With the entry of the later stage of Moores law, the marginal cost of process upgrading continues to increase, and the number of participants in the advanced process track has been greatly reduced. There are 29 Fabs with 180nm process capacity, and only 6 with 14nm mass production capacity. Currently, only TSMC, Samsung and Intel are still in the main arena of advanced process. With the withdrawal of United Power and grofangde, SMIC is the only advanced process challenger.

It is worth mentioning that, although SMIC issued A-share on the science and technology innovation board this time, the par value of the shares is US $0.004, and the par value of the shares will be RMB 1 as the benchmark when the mandatory delisting of trading type is triggered in the future.

The return of red chips is heating up

For SMICs return to A-share this time, industrial securities analysis believes that SMICs second listing on the science and technology innovation board this time, compared with the additional issuance on the Hong Kong stock market, or the privatization or spin off asset listing in China, the additional issuance on the science and technology innovation board has a relatively small impact on the existing shareholders equity, and has more room to improve the valuation, which is in line with the common interests of the company and investors.

Guangfa Securities strategy team believes that SMIC has opened up a new path of a + H after the return of China concept shares to H shares; in addition, it has previously relaxed the threshold of market value for the return of red chips to 20 billion yuan and the notice on matters related to the application of red chip enterprises for the issuance and listing of science and Technology Innovation Board issued by Shanghai Stock Exchange on June 5, which provides a system basis for the return of red chips to science and technology innovation board.

On the evening of June 17, Geely Automobile issued a notice saying that the board of directors approved the preliminary proposal for the possible issuance of RMB shares and the listing on the science and technology innovation board. The number of a shares to be issued by the company will not exceed 15% of the total issued share capital.

Like SMIC, Geely Automobile is also a red chip stock registered in the Cayman Islands. If it can land on the science and technology innovation board, it will realize the secondary listing of a shares.

Dong Dengxin, director of the Institute of Finance and securities of Wuhan University of science and technology, pointed out to reporters that the return of SMIC and Geely Automobile to the A-share market is a good start, which also shows that the inclusiveness of Shanghai and Shenzhen exchanges is improving, reflecting the exchanges attitude towards the return of red chips and Chinese stocks. If science and technology innovation board and gem can attract more science and technology innovation enterprises and new economic companies, it will help to improve the industrial structure of A-share listed companies.

In addition, the return of red chips and Zhongwei shares has also brought investment banking opportunities to domestic securities companies. If calculated at 1.5% underwriting and recommendation rate, the underwriting and recommendation fee cake of SMICs IPO in the science and Technology Innovation Board will reach 300 million yuan, and there will be six securities companies participating in cake distribution. According to the prospectus, the A-share IPO of SMIC consists of Haitong Securities, two joint sponsors (lead underwriters) of CICC, and four joint lead underwriters (Guotai Junan, CSCI, Guokai securities and Morgan Stanley Huaxin).

A person from an investment bank of a securities firm in Beijing told reporters that many large-scale IPO projects will have multiple securities firms participating in underwriting and recommendation together, and the difficulty for such enterprises to list materials may not be great. It depends on how the securities firms show their talents to share their interests.

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