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Citi downgraded China Resources Microelectronics Ltd (688396:CH) from Buy to Neutral on Monday, maintaining a price target of RMB47.00 amid concerns about sluggish power semiconductor pricing and margins.
The research firm cited persistent industry oversupply conditions despite the company’s production lines running at high capacity. China Resources Microelectronics is experiencing stable demand growth from consumer electronics, industrial applications, and automotive sectors, with its 5/6/8 production lines fully loaded and utilization improving at its Chongqing 12 line.
Citi noted potential upside from China’s artificial intelligence infrastructure build-out, which could drive increased demand for power management integrated circuits (PMIC). The firm lowered its earnings estimates for the company based on a more conservative outlook for revenue and margins.
Competition in the power semiconductor space continues to intensify as more domestic producers enter the market for insulated-gate bipolar transistors (IGBT), silicon carbide (SiC), and gallium nitride (GaN) products, driving prices down rapidly despite growing revenue contributions from these segments.
Citi indicated it would adopt a more positive stance on the power semiconductor sector when industry supply and demand become better balanced, maintaining its RMB47 price target as it rolls over to a 12-month forward valuation.
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