Hua Hong Semiconductor Ltd_ Strong revenue guidance for 1Q25

Summary of Hua Hong Semiconductor Ltd Conference Call Company Overview - Company: Hua Hong Semiconductor Ltd - Industry: Technology Semiconductors - Market Cap: US$5,017 million - **Stock Rating**: Overweight - **Price Target**: HK$28.00 - Current Price: HK$26.30 Key Financial Highlights - **4Q24 Financial Results**: - Revenue: US$539 million, up 2% Q/Q and 18% Y/Y - Gross Margin (GM): 11.4%, in line with guidance - Overall Utilization Rate (UTR): 103%, down 2% Q/Q due to fluctuations in CIS volume [2][3] - 1Q25 Guidance: - Revenue expected between US$530-550 million, indicating a decrease of 2$173-180 million in 2025, which may impact GM if ASP recovery is slower than anticipated [4] - Collaboration with Global IDMs: - Partnerships with companies like ST Micro and Infineon are expected to enhance GM throughout the year - Management aims to achieve a GM of over 20% within 1-1.5 years [3] Risks and Considerations - Potential Risks: - Pricing pressure in the discrete business could continue to affect GM - Slow scaling of the Wuxi fab or challenges in acquiring new customers may hinder growth [10] - Market Dynamics: - The company is monitoring the competitive landscape, particularly regarding local customers gaining market share and aggressive capacity expansions by other Chinese players [10] Valuation Metrics - EPS Forecast: - 2025 EPS expected at US$0.13, with a prior estimate of US$0.12 - P/E ratio projected to decrease from 39.5 in 2024 to 26.0 in 2025 [5] - Revenue Projections: - Revenue expected to increase from US$2,001 million in 2024 to US$2,508 million in 2025 [5] Conclusion Hua Hong Semiconductor Ltd is positioned for moderate growth in 2025, with a focus on improving margins and expanding operational capacity. However, the company faces challenges from pricing pressures and competitive dynamics in the semiconductor industry. The management's strategic collaborations and new fab developments are critical to achieving their financial targets.