What happened: on November 11, the company released a report for the third quarter of 2021, with operating revenue of US $452 million, up 78.5% from the same period last year, and net profit of US $51 million, up 187.1% from the same period last year.

Both ASP and capacity utilization rose, resulting in a strong performance. Benefiting from the increase in the average sales price of products from major technology platforms and the extremely high capacity utilization rate, the company's sales revenue reached a record high again, reaching US $451.5 million, an increase of 78.5% year-on-year and 30.4% month-on-month; gross profit margin remained stable and rose to 27.1%, up 2.9% from the same period last year and 2.3% from the previous year; and the net profit from home was 51 million US dollars, up 187.1% from the same period last year.

Seize the market opportunity, 12-inch IGBT output continues to rise. In 2020, Huahong Semiconductor introduced 8-inch IGBT technology into 12-inch production line, and successfully established the IGBT wafer production process, which successfully passed the customer certification and became the first pure wafer foundry in the world to mass produce advanced trench gate electric field cut-off IGBT in 8-inch and 12-inch production lines at the same time. With the rapid development of new energy vehicles and other power conversion applications, the demand for IGBT products continues to rise. At present, the company's 12-inch IGBT output has exceeded 10000 wafers, and all electrical parameters maintain excellent levels.

DCF valuation: HK $69.2

We use the DCF method to calculate the current fair value of the share price at US $8.90, which is about HK $69.2 at the exchange rate of 7.79 on November 12, 2021.

Profit forecast: the company is expected to maintain a "highly recommended" rating with a revenue of US $1.59 billion for 2021-2023 and a net profit of US $2.4 billion for its parent.

Risk hints: (1) intensified competition in the industry; (2) technological research and development is not as expected; (3) the unrealizability of profit forecast and the inapplicability of valuation methods.