Core Insights - The company reported a revenue of $566 million for Q2 2025, representing a year-on-year increase of 18.3% and a quarter-on-quarter increase of 4.6% driven by an increase in wafer delivery volume [1] - Gross margin was 10.9%, exceeding the upper guidance limit due to improved utilization rates, with net profit attributable to shareholders at $8 million, up 19.2% year-on-year and 112.1% quarter-on-quarter [1] - The company provided a positive guidance for Q3 2025, expecting revenue between $620 million and $640 million, with a significant increase in quarterly growth and an improved gross margin of 10-12% [1] Revenue Breakdown - Embedded non-volatile memory revenue increased by 2.9% year-on-year and 8.3% quarter-on-quarter, driven by MCU demand from industrial and automotive clients [1] - Power device revenue grew by 9.4% year-on-year and 2.4% quarter-on-quarter, with growth primarily from super junction and MOSFET products [1] - Analog and power revenue surged by 59.3% year-on-year and 17.8% quarter-on-quarter, mainly driven by high demand for BCD platform power management chips [1] Pricing and Capacity Expansion - The company executed price increases this quarter, with expectations of single-digit price increases in the second half of the year, although the pace of price increases for power device products remains slow [1] - The company adjusted its wafer foundry average prices for 2025 and 2026 to $438 and $474 respectively, with gross margins revised to 12.1% and 16.1% [1] - Capacity expansion is accelerating, with the first batch of capacity expected to reach 80-90% utilization by the end of this year, and full capacity of 83,000 wafers per month planned for mid-2026 [1] Investment Rating and Price Target - The target price has been raised to HKD 54, maintaining a buy rating based on stable demand growth supporting high utilization rates and timely capacity expansion [2] - Adjustments to net profit forecasts for 2025-2027 are made to $9 million, $23 million, and $26 million respectively, reflecting the company's performance recovery certainty and potential asset injection expectations [2] - The target price corresponds to a 1.8 times projected price-to-book ratio for 2025, aligning with the upper limit of the company's price-to-book ratio over the past decade [2]

Investment Rating - The report assigns a "Buy" rating for the company with a target price of HKD 54.00, representing a potential upside of 22.73% from the current stock price of HKD 44.00 [3][4]. Core Insights - The demand remains strong, with operational trends improving. The company is expected to maintain high utilization rates and stable growth in revenue and profits due to ongoing demand recovery and capacity expansion [4][6]. - The company has seen a significant improvement in its earnings, with a projected revenue increase of 22.7% in 2025 and 19.4% in 2026. The gross margin is expected to improve to 12.1% in 2025 and 16.1% in 2026 [5][6]. - The company is accelerating its capacity expansion, with the first batch of production capacity expected to reach 80-90% utilization by the end of this year and full capacity by mid-2026 [6][6]. Summary by Sections Financial Performance - For the fiscal year ending December 31, 2023, the company reported total revenue of USD 2.29 billion, a decrease of 7.7% from the previous year. However, projections indicate a recovery with revenues expected to reach USD 2.46 billion in 2025 and USD 2.94 billion in 2026 [5][17]. - The gross margin for 2023 was 21.3%, which is expected to decline to 10.2% in 2024 but recover to 12.1% in 2025 and 16.1% in 2026 [5][17]. - Shareholder net profit for 2023 was USD 280 million, with projections of USD 97 million in 2025 and USD 227 million in 2026, indicating a significant recovery trajectory [5][17]. Market Demand and Pricing - The company has experienced a positive trend in its core technology platforms, with embedded non-volatile memory revenue growing by 2.9% year-on-year and power device revenue increasing by 9.4% [6][6]. - The company has implemented price increases across its product lines, with expectations of single-digit price increases reflecting in the second half of the year [6][6]. Capacity Expansion - The company is on track to achieve 80-90% load for its new production capacity by the end of this year, with plans to reach full capacity by mid-2026 and initiate a second phase of capacity expansion by 2027 [6][6]. - The overall utilization rate for Q2 2025 was reported at 108.3%, marking a new high since 2023, indicating strong demand recovery across major technology platforms [6][6].

Core Viewpoint - The company reported Q2 2025 revenue of $566.1 million, an increase of 18.3% year-on-year and 4.6% quarter-on-quarter, meeting guidance. The gross margin was 10.9%, exceeding previous guidance of 7-9% [1][20][21]. Group 1: Financial Performance - Q2 2025 revenue was $566.1 million, driven by increased shipment volumes. Gross margin improved to 10.9%, benefiting from higher capacity utilization and average selling price (ASP) increases, partially offset by rising depreciation costs [1][20][21]. - Net profit attributable to shareholders was $8 million, up 19.2% year-on-year and 112.1% quarter-on-quarter [1][21]. - Operating expenses were $97.9 million, an increase of 8.4% year-on-year, mainly due to rising R&D and depreciation costs [21]. Group 2: Revenue Breakdown - Embedded non-volatile memory platform revenue reached $141.2 million, up 3% year-on-year and 8.5% quarter-on-quarter [2][23]. - Power device revenue was $166.7 million, a 9.4% increase year-on-year, driven by demand for super junction MOSFETs [2][23]. - Revenue from analog and power management ICs surged 59.3% year-on-year to $161.2 million, driven by increased demand for power management integrated circuits [2][23]. Group 3: Future Guidance - Q3 2025 revenue guidance is set between $620 million and $640 million, with a midpoint indicating a 19.7% year-on-year increase and an 11.3% quarter-on-quarter increase, supported by growth in AI and automotive sectors [1][20][25]. - Gross margin for Q3 is expected to be between 10% and 12%, with visibility for Q4 remaining low but still within this range [25][34]. Group 4: Capacity and Production - The new 12-inch production line in Wuxi is expected to reach full capacity by mid-2026, with half of the capacity already online [1][20]. - By the end of 2025, the utilization rate of the new plant is projected to reach 80-90% [25][35]. Group 5: Market Strategy - The company aims to enhance its competitive position in the wafer foundry industry by focusing on core competencies in product, process, R&D, and supply chain management [20][28]. - The strategy includes collaboration with domestic and international strategic customers to expand its global customer base [20][28].