Core Viewpoint - Hua Hong's 4Q25 results showed strong revenue growth driven by high utilization and robust shipments, although net profit declined due to increased labor costs [1] Financial Performance - 4Q25 revenue rose 22.4% YoY and 3.9% QoQ to US$660 million, marking a quarterly record [1] - FY25 revenue increased 20% YoY to US$2.4 billion, aligning with estimates and consensus [1] - GPM for FY25 was 11.8%, consistent with estimates, but impacted by higher depreciation [1] Product and Capacity Development - The product mix improved in FY25, with 12-inch shipments accounting for approximately 60% of revenue, up from 50% in FY24 [2] - High utilization rates were maintained at ~106% for FY25 and ~104% for 4Q25, with a slight QoQ decline due to the ramp-up of 12-inch capacity [2] - Revenue from Analog & Power Management grew 41% YoY, driven by AI demand, while Embedded NVM and Standalone NVM also saw significant growth [2] Strategic Acquisitions and Expansions - The acquisition of Shanghai Huali Microelectronics (HLMC) for RMB8.3 billion is expected to add ~40,000 12-inch wafers per month of capacity [3] - The expansion of Fab 9B is set to commence this year, mirroring the existing Fab 9A's capacity of ~83,000 12-inch wafers at full ramp [3] Valuation and Market Position - Current share price appears rich despite structural improvements, with a target price adjusted to HK$80 based on 2.9x 2026E P/B [3] - Continued depreciation pressure and elevated capex intensity are anticipated from the ramp-up of Fab 9A and the build-out of Fab 9B [3]

Financial Performance - Hyundai Motor Company reported a 22% drop in net profits to KRW 10.365 trillion (US$7.2 billion) in 2025, primarily due to the impact of US import tariffs introduced in April 2025 [1] - Operating profits decreased by 19.5% to KRW 11.458 trillion (US$8.0 billion) as the company absorbed an additional KRW 4.1 trillion in costs related to the US tariffs [3] - The fourth quarter of 2025 was particularly challenging, with net profits plunging by 52% to KRW 1.18 trillion (US$821 million) [1] Revenue and Sales - Revenues increased by 6.3% to KRW 186.254 trillion (US$130 billion) in 2025, despite a 0.1% decline in global vehicle sales to 4,138,389 units [2] - The rise in revenues was supported by an improved product mix, including a 27% increase in eco-friendly vehicles to 961,812 units [2] Market Outlook - Hyundai forecasts a slight increase in global vehicle sales to 4.158 million units in 2026, with revenues expected to rise by 1% to 2% to KRW 190 trillion [5] - Sales projections for key markets in 2026 include North America at 1,231,000 units, Europe at 601,000 units, India at 592,000 units (+3%), South Korea at 700,000 units (-2%), and South America at 328,000 units (+0.1%) [5] Challenges - A Hyundai official described 2025 as a challenging year due to weakening global demand, increased competition from Chinese automakers, and uncertainties surrounding import tariffs [4]

Financial Data and Key Metrics Changes - The company reported revenues of $3.19 billion for Q3 2025, which was $17 million above the midpoint of the business outlook range, with a gross margin of 33.2%, slightly below expectations [5][18] - Diluted earnings per share were $0.29, with net income of $267 million, down from $351 million year-over-year [20][21] - Free cash flow was positive at $130 million, with inventory reduced to $3.17 billion, a decrease of about $100 million compared to the previous quarter [21] Business Line Data and Key Metrics Changes - Automotive revenues grew approximately 10% sequentially, while industrial revenues increased by 8% sequentially and 13% year-over-year [10][17] - Personal electronics saw a significant increase of 40% sequentially, driven by seasonality and increased silicon content [12] - Power and discrete products experienced a decline of 34.3% year-over-year, while embedded processing revenues grew by 8.7% [17] Market Data and Key Metrics Changes - All end markets except automotive returned to year-on-year growth, with automotive still decreasing by about 17% [17] - Sales to OEMs decreased by 5.1%, while revenues from distribution increased by 7.6% [17] - The industrial segment showed a mixed performance, with strong growth in power energy but softness in factory automation [40] Company Strategy and Development Direction - The company is focused on accelerating innovation and reshaping its manufacturing footprint to improve cost efficiency [24][25] - A definitive agreement was made to acquire NXP's MEMS sensor business for up to $950 million, aimed at expanding the MEMS sensor technology portfolio [9] - The company plans to reduce its net CapEx to slightly below $2 billion for the full year 2025, reflecting a strategic adjustment to current market conditions [24] Management's Comments on Operating Environment and Future Outlook - Management expects revenues for Q4 2025 to be around $3.28 billion, indicating a 2.9% sequential increase, with a gross margin target of about 35% [23] - The outlook for 2026 suggests a recovery in silicon carbide demand and a normalization of inventory levels [78] - Management highlighted the importance of managing distribution closely to align production with demand, particularly in the industrial segment [41] Other Important Information - The company repaid $750 million for the first tranche of its 2020 convertible bond during the third quarter [22] - The company maintains a solid financial position with total liquidity of $4.78 billion and total financial debt of $2.17 billion [22] Q&A Session Summary Question: Why is the revenue guidance for Q4 below seasonal expectations? - Management explained that automotive performance is impacted by decreased capacity reservation fees and volume from a key customer, leading to lower-than-expected seasonal growth [28] Question: How sustainable is the gross margin improvement? - Management indicated that improved manufacturing efficiency is a key driver for gross margin improvement, but there are potential negative impacts from capacity reservation fee reductions and pricing renegotiations [30][31] Question: What is the outlook for the industrial segment? - Management noted that while some sub-segments like power energy are growing, factory automation remains soft, and inventory management is crucial [40][41] Question: What are the drivers for improving power discrete profitability? - Management highlighted that increased revenues and transitioning to next-generation silicon carbide products will help improve profitability in the power discrete segment [88][90] Question: What is the expected trend for capacity reservation fees in 2026? - Management clarified that capacity reservation fees are expected to decline at the beginning of 2026 but will remain stable throughout the year [44] Question: How will inventory levels be managed in the first half of 2026? - Management expects inventory levels to increase in the first half of the year but will continue to control inventory closely to align with market demand [61][62]