Core Viewpoint - The report from Everbright Securities indicates that downstream demand is recovering, leading to a price increase cycle for Huahong Semiconductor (01347). However, accelerated capacity expansion is expected to increase depreciation pressure, resulting in adjusted net profit forecasts for 2025-2027 [1] Group 1: Financial Performance - In Q3 2025, the company achieved revenue of $635 million, a year-on-year increase of 20.7% and a quarter-on-quarter increase of 12.2%, aligning with previous guidance [2] - The gross margin for Q3 2025 was 13.5%, exceeding the company's guidance range of 10%-12% and the market expectation of 11.3%, with a year-on-year increase of 1.3 percentage points [2] - The net profit attributable to shareholders for Q3 2025 was $25.73 million, slightly below the market expectation of $27.17 million [2] Group 2: Market Demand and Pricing - Demand is expected to continue improving in 2026, with significant growth in power management and storage chips driven by AI demand [3] - The ASP (Average Selling Price) increased by 5.2% year-on-year and quarter-on-quarter in Q3 2025, indicating a successful price increase [3] - The "Local for Local" strategy is anticipated to start contributing to revenue from Q4 2025, with early production of ST's 40nm MCU [3] Group 3: Capacity and Production - The utilization rate in Q3 2025 was 109.5%, reflecting a year-on-year increase of 4.2 percentage points due to recovering semiconductor demand [4] - The company shipped 1.4 million 8-inch wafers in Q3 2025, a year-on-year increase of 16.7% [4] - Fab 9 is expected to complete its capacity release of 83,000 wafers per month by the end of 2026, which will drive revenue growth [4] Group 4: Future Guidance - The company has guided Q4 2025 revenue to be between $650 million and $660 million, which is lower than the market expectation of $662 million [5] - The gross margin guidance for Q4 2025 is set at 12%-14%, which is higher than the market expectation of 11.3% [5] - The company anticipates continued revenue growth in 2026 due to improved semiconductor demand and the "Local for Local" strategy [5]