[ET Net News Agency, 10 August 2018] Credit Suisse raised its target price for Hua Hong
Semiconductor (01347) to HK$25 from HK$21, but downgraded its rating to "neutral" from
"outperform" following 96% appreciation from Mid-February.
The research house said Hua Hong's 2Q sales grew 9.4% QoQ versus 5-7% guide on strength
in bank cards, MCUs (microcontroller units) and discretes. Gross margins (GM) was 33.6%,
above guidance for 32-33% as utilisation stays full and mix improves. Higher sales and GMs
lifted operating margins to 19%, putting 2Q EPS at HK$0.34, above Credit Suisse's
forecasts of HK$0.25.
Hua Hong's 12" 40k Wuxi JV fab will start from 2H 2019 to sustain growth. Credit Suisse
expects a transition phase of slowing profitability growth due to JV sharing of profits,
time to get to scale, and potentially easing tightness and pricing into the ramp. (KL)