HUA HONG SEMI(1347.HK):SLOWLY BUT SURELY GRADUAL RECOVERY IS IN PLAY
HUA HONG SEMI(1347.HK):SLOWLY BUT SURELY GRADUAL RECOVERY IS IN PLAY
Maintain BUY with unchanged TP at HK$24. We slightly trim our revenue forecasts for 2024/25E by 3%/4% on lower ASP, and revise up GPM by 0.5ppt on better-than-projected improvement in margin. With the expectation of production ramp-up at its new 12-inch fab, we think Hua Hong is well positioned as end-market demand is gradually coming back and the semiconductor localization trend remains intact. Our TP is HK$24 on the same 0.8x P/B, ~10% higher than 2-year historical avg. forward P/B as we believe the cycle trough has passed. We expect broad end-market demand to gradually recover to a normal growth trajectory with Hua Hong's revenue projected to grow by a single digit QoQ in the next two quarters.Hua Hong Semi announced 2Q24 results. Revenue was down 24.2% YoY but up 4.0% QoQ to US$479mn, slightly missing Bloomberg consensus by 2.0% and our estimates by 1.6%. The moderate sequential growth was a result of growing wafer shipments (+8.4% QoQ) partially offset by continued downward ASP (-3.5% QoQ). GPM increased QoQ to 10.5% (vs. 6.4%/27.7% in 1Q24/2Q23) on higher utilization (98% in Q2 vs. 92% in Q1). 2Q GPM beat both consensus (8.7%) and our estimate (9.0%). Net profit was US$6.7mn in 2Q24 (-91% YoY/-79% QoQ), missing consensus estimate (US$20mn) but beating our estimate (US$2mn). 3Q revenue guidance (mid-point) is US$510mn, implying a 10.3% YoY decline and 6.6% QoQ growth. GPM guidance is 10% to 12%. 2Q results and 3Q guidance suggest the end market is still challenging but some demand is gradually improving (e.g., consumer electronics), which is in-line with our expectation. Looking forward, we think Hua Hong remains a key beneficiary of semiconductor localization in China. Maintain BUY with unchanged TP at HK$24 on the same 0.8x P/B.
華虹半導體公佈2Q24業績。營業收入同比下降24.2%，但環比增長4.0%至4.79億美元，略低於彭博社的共識預期2.0%和我們的預期1.6%。溫和的季度環比增長是由增加的晶圓出貨量（季度環比增長8.4%）部分抵消了持續下降的ASP（季度環比下降3.5%）所致。GPm環比提高至10.5%（1Q24 / 2Q23中的6.4% / 27.7%），得益於更高的利用率（Q2中98%，Q1中92%）。2Q GPm擊敗了共識預期（8.7%）和我們的預期（9.0%）。2Q24淨利潤爲670萬美元（同比下降91% / 季度環比下降79%），低於共識預期（2,000萬美元），但高於我們的預期（200萬美元）。3Q 營業收入指導（中值）爲5.1億美元，意味着同比下降10.3%和環比增長6.6%，GPm指導爲10％至12％。2Q的業績和3Q的業績預期表明市場仍然具有挑戰性，但部分需求正在逐漸改善（例如消費電子），這與我們的預期相一致。展望未來，我們認爲華虹仍然是中國半導體本地化的主要受益者。維持買入，目標價不變爲24港元，使用相同的0.8倍 P / b計算。
Consumer electronics sales grew sequentially from a low base since 4Q23, while demand in other markets is still weak. Consumer electronics (62% revenue contribution in 2Q) grew 14.0%/3.6% QoQ in 1Q/2Q, showing signs of recovery. SMIC (981 HK, NR) reported a similar trend with a rising revenue contribution from smartphone and consumer electronics segments. SMIC mgmt. attributed this to rush orders and inventory restocking. We believe demand will continue recovering at a moderate pace and revenue will grow by a single digit sequentially in Q3 and Q4.
消費電子-半導體銷售量從4Q23的低點中逐步增長，而其他市場的需求仍然疲弱。消費電子（在2Q中貢獻了62%的營業收入）在1Q/2Q分別環比增長了14.0% / 3.6%，顯示出復甦的跡象。中芯國際（981 HK，NR）報告了類似的趨勢，並從智能手機和消費電子領域獲得了不斷增長的營收貢獻。中芯國際的管理層將此歸因於搶購訂單和庫存補充。我們認爲，需求將以適度的速度繼續恢復，並且營收將在Q3和Q4中逐季度以個位數增長。
Mgmt. forecasts utilization to stay at a high level (98% in Q2 vs. 84%/92% in 4Q23/1Q24), and ASP to rise in 2H despite a challenging 1H. The company achieved utilization rates of 107.6% for its 8-inch fabs and 89.3% for its 12-inch fabs. Wafer shipments (8-inch equivalent) was up by 3% YoY/7.8% QoQ. We project the overall utilization will stay above 95% during 2H with recovering demand driving continuous improvement of utilization rate at Hua Hong's 12-inch fabs. The growth in utilization/wafer shipments was partially eroded by a declining ASP (down for six consecutive quarters). This coincided with our previous expectations that "ASP is likely to face challenges", but the company "is capable of managing the impacts, given its strong collaborations with clients" (report). Looking forward, We believe the priority for Hua Hong is still keeping utilization rate at close to 100% level, while balancing ASP and utilization rate to maximize total revenue.
管理層預測，利用率將在挑戰性的1H後保持在高水平（Q2中爲98%，而4Q23 / 1Q24爲84% / 92%），ASP將在2H上升。公司8英寸工廠和12英寸工廠的利用率分別達到107.6%和89.3%。晶圓出貨量（8英寸當量）同比增長3% / 季度環比增長7.8%。我們預測綜合利用率將在2H保持在95%以上，因爲恢復的需求將驅動華虹12英寸工廠的利用率不斷提高。利用率/晶圓出貨量的增長部分被下降的ASP所抵消（連續六個季度下降）。這與我們之前的預期相吻合，即「ASP可能面臨挑戰」，但是公司「有能力應對影響，因爲與客戶之間的強強聯合」（報告）。展望未來，我們認爲華虹的首要任務仍然是將利用率保持接近100%的水平，同時平衡ASP和利用率以最大化總收入。
Maintain BUY with unchanged TP at HK$24. We slightly trim our revenue forecasts for 2024/25E by 3%/4% on lower ASP, and revise up GPM by 0.5ppt on better-than-projected improvement in margin. With the expectation of production ramp-up at its new 12-inch fab, we think Hua Hong is well positioned as end-market demand is gradually coming back and the semiconductor localization trend remains intact. Our TP is HK$24 on the same 0.8x P/B, ~10% higher than 2-year historical avg. forward P/B as we believe the cycle trough has passed. We expect broad end-market demand to gradually recover to a normal growth trajectory with Hua Hong's revenue projected to grow by a single digit QoQ in the next two quarters.
維持買入評級，目標價不變爲24港元。我們稍微調低了2024/25E的營收預測3%/4%以反映更低的ASP，同時將GPm上調0.5ppt，因爲利潤率的改善超出了我們的預期。隨着公司新12英寸工廠的產能逐步提升，我們認爲華虹將在終端市場需求逐步恢復和半導體本地化趨勢仍然保持的情況下佔據有利地位。我們的目標價爲24港元，使用相同的0.8倍P/b計算，比2年曆史平均前進P/b高約10%，因爲我們認爲週期低谷已過去。我們預計廣泛的市場需求將逐步恢復到正常的增長軌跡，華虹的營收預計在未來兩個季度中逐季度以個位數增長。
譯文內容由第三人軟體翻譯。
