The performance of 3Q21 is beyond the guidance, and the wafer foundry continues to have a high demeanor.
According to the company announcement, 3Q21 achieved sales revenue of US $452 million (YoY 78.5% YoY QoQ30.4), exceeding the company's guidelines by about 10% (US $410 million), and a quarterly gross margin of 27.1%, slightly exceeding the upper limit of the guidelines (between 25% and 27%). The company made a net profit of US $50.8 million per quarter (YoY 187.1%, QoQ 15.3%). The company's total monthly production capacity increased to 297 thousand wafers equivalent to 8 inch wafers, an increase of 87 thousand over the previous quarter, mainly due to the successful expansion of Huahong Wuxi production capacity. Single-quarter shipments are equivalent to 907,000 pieces of 8-inch wafers, and the capacity utilization rate reached 110.9%. (equivalent to 8-inch) reached US $497.8, a month-on-month increase of 5%, all of which reached an all-time high.
The new production capacity and new process of Huahong Wuxi have been successfully introduced continuously.
The gross profit margin of 3Q21 Wuxi 12-inch factory rose to 8.5% (2Q21VZ 3.3%), and the capacity utilization rate was 108.7% (2Q21VR 104.1%), which continued to be fully loaded. The monthly production capacity increased to 53 thousand pieces from 40 thousand pieces in the previous quarter, and the 12-inch wafer 126.7 thousand pieces (QoQ 55%) were shipped in a single season.
The company successfully achieved large-scale mass production of 90nm eflash, 90nm BCD and 55nm eFlash, and the proportion of 3Q21 55/65nm and 90/95nm revenue increased to 8.9% and 18.3%. 3Q's capital expenditure is US $253 million (2Q21 137 million), supporting the Wuxi plant to increase its monthly production capacity to 65,000 tablets by the end of the year. The company plans to further increase the monthly production capacity of Wuxi to 95,000 tablets by the end of 22nd.
4Q21 guidelines predict the persistence of wafer generation scene.
According to the company's guidelines, sales in the fourth quarter of 2021 are expected to be about $490 million (QoQ8.5%), with a gross profit margin of about 27% MUE 28%. We believe that the rapid rise of domestic 5G, AIoT and new energy industries is expected to lead to sustained demand for chips such as MCU, power management, IGBT, CIS, super junction, and so on.
We are optimistic about Huahong's 12-inch wafer production capacity in Wuxi under the "812" strategy, and the expansion of the characteristic process technology platform promotes product portfolio improvement, which drives the continuous improvement of performance. It is estimated that the revenue in 2021-2023 will be US $1.59 billion, respectively, and the net profit in 2021-2023 will be US $1.9 million. The BPS is $2.09 / 2.27 / $2.49, corresponding to 2.77 times 2022 / PB, maintaining a "buy" rating.
Risk tips: downstream demand slows down; the introduction of new processes is not as expected; production expansion is not as expected.