华虹-近期提价和高产能利用率推动强劲业绩指引；增持Hua Hong Semiconductor Ltd-Strong guidance driven by recent price hike and high UTR; EW

Summary of Hua Hong Semiconductor Ltd Conference Call Company Overview - Company: Hua Hong Semiconductor Ltd - Industry: Semiconductors - Market Cap: US$9,802 million - Stock Rating: Equal-weight (EW) - Price Target: HK$34.00 - Current Price: HK$44.78 - 52-Week Range: HK$45.60 - HK$14.88 - Average Daily Trading Value: HK$926 million Key Financial Highlights - 2Q25 Revenue: US$566 million, up 5% Q/Q and 18% Y/Y, in line with expectations [2] - Gross Margin: 10.9%, up 1.7 percentage points Q/Q, exceeding guidance of 7-9% due to a strong utilization rate (UTR) of 108% [2][10] - 3Q25 Revenue Guidance: Expected to be between US$620-640 million, representing a 10-13% increase Q/Q, with a gross margin of 10-12% [3] - Revenue Mix: 12-inch wafers accounted for 59% of revenue in Q2, driven by the ramp-up of Fab 9 [3] Pricing and Market Dynamics - Price Hike: The company has started raising prices for 12-inch wafers, which is expected to contribute significantly to revenue and gross margin in Q3 and Q4 [3] - Depreciation Concerns: Rising depreciation burden may slow margin recovery, despite positive pricing actions for mature node foundries [5] - Tariff Impact: North America accounted for 9.4% of total revenue in 2Q25; management believes the tariff impact is manageable due to clients having businesses outside the US [4] Investment Outlook - Valuation: The company is trading at 1.5x the estimated 2025 book value per share (BVPS), which is considered fair compared to its historical range of 0.5-3.2x since 2014 [5] - Utilization Rate: High UTR (>100%) is a positive indicator for future performance [5] Risks and Considerations - Upside Risks: - Higher than expected fab utilization and wafer average selling price (ASP) [13] - Faster market share gain from local customers [13] - Accelerated penetration of electric vehicles [13] - Downside Risks: - Potential failure to implement price hikes [13] - Aggressive capacity expansion by other Chinese players in the 8-inch segment [13] - Slow scaling or customer acquisition challenges at the Wuxi fab [13] Conclusion Hua Hong Semiconductor Ltd shows strong revenue growth and margin improvement driven by strategic pricing actions and high utilization rates. However, concerns regarding rising depreciation and potential pricing pressures in the 8-inch wafer market warrant caution. The stock is currently viewed as fairly valued, with a balanced outlook considering both upside and downside risks.