What happened: 3Q21 achieved revenue of $451 million, an increase of 78.5% year-on-year and 30.4% month-on-month, significantly higher than the previous guidance of $410 million. The overall gross margin is 27.1%, slightly higher than the upper limit of the previous guidance range of 25-27%, mainly due to the rise in wafer ASP. Overall OPEX costs fell 2.5% year-on-year and rose 57.5% month-on-month, mainly due to reduced government subsidies for R & D activities. The operating profit was US $50 million, up 57.5% from the previous month; the net profit was US $51 million, up 187% from the same period last year and 15% from the previous year.
Benefiting from strong demand, 8-inch ASP rose 5.5% month-on-month, driving improved profitability: 3Q21's 8-inch revenue was $315 million, up 33.2% from a year earlier and up 20.2% from a month earlier. Among them, capacity utilization remained at a high level of 112%; ASP rose 15.0% year-on-year and 5.5% month-on-month. The increase in 8-inch price led to an increase in 8-inch gross profit margin from 31.6% of 2Q21 to 35.2%. In the fourth quarter, the company's 8-inch production capacity is expected to remain fully loaded, and we expect the annual revenue of 8-inch 21 to reach $1.15 billion, an increase of 28% over the same period last year.
The 12-inch gross profit margin rose further from the previous month: 3Q21's 12-inch revenue was $137 million, up 723% from the same period last year, up 62.5% from the previous month, and the share of income increased to 30%; the gross profit margin continued to improve to 8%; the operating loss was $18 million, narrowing compared with 2Q21's $22 million loss; due to foreign exchange losses, the profit margin of 12-inch EBITDA fell from 36% of 2Q21 to 22%. The 12-inch actual production capacity of the company has been expanded from 40K/m of 2Q21 to 53K/m of 3Q21. The introduction of customers is progressing smoothly, and the utilization rate of production capacity has reached 109%, which is further improved compared with 104% of 2Q21. The company's installed capacity has been expanded to 65K/m in October 21, and plans to expand production to 94.5K/m at the end of 22. With the smooth introduction of 12-inch customers and the release of production capacity, and the continued increase in the proportion of higher-end 55nm products is expected to drive the rise of 12-inch wafer ASP, we expect 12-inch revenue to maintain rapid growth, and 21 annual revenue is expected to reach US $450 million, an increase of 595% over the same period last year.
Earnings forecast, valuation and rating: we maintain the strong growth momentum of the company's fundamentals, with 8-inch fundamentals stable and 12-inch positive driving the overall performance continues to grow rapidly. Based on the strong downstream demand, higher-than-expected wafer price increases and high capacity utilization, we raised our 21-year net profit forecast by 19% to $185 million and maintained the 22-23 net profit forecast of US $211 million. The corresponding year-on-year growth rate was 86%, 14% and 37% respectively. We believe that although the strong expectations of short-term corporate fundamentals are highly reflected in the early share price, considering that a smooth increase in the late 12 inches is expected to drive profit margin improvement and profit release, which in turn drives the valuation increase, maintaining the target price of HK $49 (corresponding to 3.0x PB for 21 years) and maintaining the "overweight" rating.
Risk hint: the 12-inch volume is less than expected; the valuation of the semiconductor sector fluctuates systematically.