According to Zhito Finance APP, Goldman Sachs released a research report stating that it maintains a "Buy" rating on HUA HONG SEMI (01347) with a Target Price of HKD 31.3. Although the demand for the company's products, including PMIC, CIS, logic, and RF products, remains robust, the growth in end markets, such as Consumer Electronics and Autos, is still moderate, and microcontrollers (MCUs) and power discrete devices may take more time to recover.

Supported by gradually recovering demand, Goldman Sachs maintains a positive long-term view on HUA HONG SEMI, as local customers increasingly prefer HUA HONG's specialized technology, which has wide applications in Consumer Electronics, computers, electric vehicles, New energy Fund, and industrial sectors.

Goldman Sachs forecasts that HUA HONG's revenue will increase by 19% year-on-year to USD 0.541 billion in Q4 2024, approximately in line with the group's guidance target of USD 0.53-0.54 billion. Despite the expectation that the 12-inch wafer fabs will operate at full capacity, and the 8-inch wafer fabs will also be at high load, it believes that the recovery in wafer prices will still be moderate and will require time.

Goldman Sachs expects HUA HONG's gross margin in Q4 2024 will moderately rise to 12.9%, consistent with the guidance target range of 11%-13%. Despite the gradual improvement in gross margin, HUA HONG has stated that the second 12-inch wafer fab is expected to start production in the first quarter of 2025 as a strategic investment towards 40nm technology and long-term business expansion.

Management pointed out that the capacity expansion of the new factory will be carried out in a gradual manner, allowing for flexible adjustments according to market conditions. The firm expects this will alleviate the impact of the increasing design and maintenance costs in the future.