毛利率持续改善

Investment Rating - The report maintains a "Buy" rating for Huahong Semiconductor (1347.HK) and Huahong Company (688347.CH) [1][9] Core Views - Huahong's gross margin improved to 6.4% in Q1, exceeding company guidance and market expectations, with a projected median gross margin of 8% for Q2, indicating a continued upward trend [1] - The semiconductor foundry industry is in an upward cycle this year, particularly in China, with products like BCD, memory, and image sensors showing improved market conditions [1] - The company is on track to advance its 12-inch fab in Wuxi, with equipment expected to be moved in September and trial production anticipated in Q4 2024, leading to capacity release in 2025 [1] Financial Performance Summary - Q1 revenue decreased by 27% year-on-year, but gross margin improved from 4.0% in Q4 to 6.4% in Q1 [1] - The company expects EBITDA growth in the coming quarters, driven by improving operating profit margins from -16.9% in Q4 last year to -10.6% in Q1 this year [1] - The target EV/EBITDA for Huahong is set at 8.5x for 2024, with target prices of HKD 20.6 for the Hong Kong stock and RMB 43.6 for the A-share, representing potential upside of 21% and 35% respectively [1][3] Financial Metrics - Q1 2024 performance: Revenue of USD 460 million, gross profit of USD 30 million, and net profit of USD 32 million, with a gross margin of 6.4% [7] - The company’s total market capitalization is approximately HKD 37.79 billion and RMB 34.95 billion [3][9] - The stock price range over the past 52 weeks was HKD 13.8 to 29.8 for the Hong Kong stock and RMB 27.9 to 59.9 for the A-share [3]