Investment Rating - Maintain "Buy" rating for Hua Hong Semiconductor (1347 HK) [1][3] Core Views - 3Q24 revenue of $526M exceeded guidance and market expectations, driven by higher wafer shipments [1] - Gross margin of 12 2% beat guidance and consensus, supported by improved capacity utilization [1] - Net profit surged 223% YoY to $44 82M, significantly above $20 66M consensus, due to FX gains and government subsidies [1] - Demand recovery is uneven across segments, with strong growth in RF, power management ICs (BCD), and CIS, while high-voltage products like IGBT remain under pressure [1] - Capacity utilization reached 105 3%, driving wafer shipments up 11 4% YoY to 1 2M units [1] - ASP increased 1 2% QoQ to $415, marking a recovery from the 24Q2 low [1] - 4Q24 guidance suggests moderate growth, with revenue expected at $530-540M and gross margin at 11-13% [1] - Hua Hong Manufacturing's new 12-inch line is on track for trial production by end-2024, with capacity expansion to 115K wafers/month by end-2025 [1] Financial Performance Revenue and Profitability - 3Q24 revenue: $526M, down 7 4% YoY but up 10% QoQ, above guidance of $500-520M and consensus of $515M [1] - 8-inch revenue: $263M, down 12% YoY, up 7% QoQ, accounting for 50% of total revenue [1] - 12-inch revenue: $263M, down 2 5% YoY, up 12 9% QoQ, also 50% of total revenue [1] - Gross margin: 12 2%, above guidance of 10-12% and consensus of 12%, down 3 9pct YoY but up 1 7pct QoQ [1] - Net profit: $44 82M, up 223% YoY and 572% QoQ, significantly above consensus of $20 66M [1] Future Projections - 2024-2026 net profit forecasts revised to $110M, $209M, and $268M, representing YoY growth of -60 6%, +89 8%, and +28 2% respectively [1] - 2024-2026 EPS estimates: $0 06, $0 12, $0 16 [2] - 2024-2026 revenue forecasts: $2B, $2 34B, $2 84B [2] Operational Highlights - 3Q24 capacity utilization: 105 3%, up 18 5pct YoY and 7 4pct QoQ [1] - 8-inch utilization: 113% [1] - 12-inch utilization: 98 5% [1] - Wafer shipments: 1 2M units, up 11 4% YoY and 8 5% QoQ [1] - ASP: $415, up 1 2% QoQ from 24Q2 low [1] Valuation - Current valuation: 46x 2024 PE, 24x 2025 PE [1] - PB ratio: 0 8x for both 2024 and 2025 [1] - Market cap: HK$50 84B [3] - Share price: HK$22 90 [3] Industry and Market Context - Semiconductor demand is recovering unevenly, with strong growth in RF, power management ICs, and CIS, but challenges persist in high-voltage products [1] - Market competition is intensifying due to capacity expansion, limiting ASP growth potential [1] - Hua Hong Manufacturing's new 12-inch line is expected to contribute to capacity expansion and support long-term growth [1]
华虹半导体：2024年三季度业绩点评：3Q24业绩超预期，看好ASP价格持续温和修复