华虹公司：三、四季度基本面持续改善

Investment Rating - The report reiterates a "Buy" rating for Hua Hong Semiconductor (1347 HK) with a target price of HKD 27 7, implying a potential upside of 19% [2][3] - For Hua Hong Company (688347 CH), the target price is adjusted to RMB 55 2, indicating a potential upside of 21% [2] Core Views - Hua Hong Semiconductor's fundamentals are expected to continue improving in Q3 and Q4, driven by a recovery in semiconductor demand [2][3] - The company's Q3 gross margin increased by 1 7 percentage points sequentially, and further improvement is anticipated in Q4 [3] - Revenue from logic and RF products surged by 54 4% YoY in Q3, while analog and power management revenue grew by 21 8% YoY [3] - The company expects significant growth in CMOS image sensors and power management products in 2024, with MCU products likely to recover [3] - Hua Hong's current EV/EBITDA is 4 8x, and its price-to-book ratio is 0 8x, indicating attractive valuations [3] Financial Performance and Forecasts - Revenue for 2024E is projected at USD 2,000 million, with a YoY decline of 13%, but a recovery to USD 2,396 million is expected in 2025E, representing a 20% YoY growth [1] - Gross margin is forecasted to improve from 10 7% in 2024E to 15 1% in 2025E and 16 6% in 2026E [1] - Net profit for 2024E is estimated at USD 98 million, with a significant recovery to USD 247 million in 2025E, reflecting a 151% YoY growth [1] - Basic EPS is projected to increase from USD 0 06 in 2024E to USD 0 14 in 2025E and USD 0 17 in 2026E [1] Valuation and Target Price - The target EV/EBITDA for 2025 is set at 8 0x, leading to a target price of HKD 27 7 for Hua Hong Semiconductor (1347 HK) and RMB 55 2 for Hua Hong Company (688347 CH) [3] - The potential upside for Hua Hong Semiconductor is 19%, while for Hua Hong Company, it is 21% [2][3] Operational Highlights - Q3 2024 revenue reached USD 526 million, exceeding guidance and showing a 10% sequential growth [3] - Q3 2024 gross margin was 12 2%, above the guidance range, with a sequential improvement of 1 7 percentage points [3] - Net profit in Q3 2024 was USD 44 8 million, marking a triple-digit YoY and sequential growth [3] - The company expects Q4 2024 revenue to grow by 2% sequentially, with gross margin potentially improving further [3] Industry Context - The semiconductor industry is experiencing a recovery in demand, particularly in logic, RF, and power management segments [3] - Hua Hong Semiconductor is well-positioned to benefit from this recovery, especially with the ramp-up of its second 12-inch wafer fab in Wuxi [3] Financial Ratios and Metrics - ROE is expected to improve from 1 2% in 2024E to 3 0% in 2025E and 3 4% in 2026E [6] - EBITDA margin is forecasted to increase from 29 6% in 2024E to 34 2% in 2025E and 35 7% in 2026E [6] - Free cash flow is projected to improve from USD -394 million in 2024E to USD -206 million in 2026E [6]