20220620-招银国际-华虹半导体-01347.HK-Corp_Day_Takeaways__Solid_2Q_guidance__12-inch_capacity_expansion_on_track_4页_575kb

Hua Hong Semiconductor (1347 HK) Summary

Core Content

Hua Hong Semiconductor (1347 HK) is a leading Chinese semiconductor manufacturer that participated in a Technology Corporate Day, providing insights into its business performance and future outlook. The company reported solid 2Q guidance and highlighted its ongoing capacity expansion, particularly in the 12-inch wafer fabrication segment. It also addressed concerns about U.S. export restrictions and provided financial data and performance metrics for its stock.

Main Points and Key Information

1. Business Performance and Guidance

• Strong demand across multiple segments: In 1Q22, all technology platforms showed strong revenue growth, with YoY increases of 51%, 406%, 66%, 91%, and 201% for eNVM, standalone NVM, discrete logic & RF, analog & PMIC, and IGBT respectively.
• 2Q22E guidance: Management indicated that the 2Q guidance was on track due to strong demand from MCU, IGBT, Nor Flash, and analog/PMIC, 100%+ utilization of both 8-inch and 12-inch capacity, and continued ASP (Average Selling Price) hikes.
• FY23E outlook: Management remained optimistic about industry demand, rising ASP, and the completion of the Wuxi 12-inch Phase II project, which is expected to drive further growth.

2. Capacity Expansion

• 8-inch capacity: Targeted UTR (Utilization to Capacity Ratio) of 100% and GPM (Gross Margin) of 45% / 50% for FY22E and FY23E respectively. Management guided $180 million in capex for FY22E to improve efficiency and expected 100% utilization in upcoming quarters.
• 12-inch capacity: Wuxi's 12-inch capacity has exceeded 70kwpm and is on track to reach 94.5kwpm by end-2022. The Wuxi Phase II factory (40nm) is expected to begin mass production by end-2022 or early 2023. Management targeted 100%+ utilization for FY22E and FY23E due to strong global and domestic client demand. GPM is expected to rise to 20% / 30% in FY22E and FY23E, compared to 9.1% in FY21.

3. US Export Restrictions

• No impact on operations: Hua Hong Semi is a certified VEU (Vital Equipment User) holder by the U.S. Department of Commerce and has an export control program management system in place. This ensures that the company faces no challenges in equipment procurement or product exports.

4. Financial Performance (YE 31 Dec)

5. Stock Data

• Market Cap: HK$34,627 million
• Average 3-month turnover (HK$mn): 235.88
• 52-week High/Low (HK$): 57.00 / 23.20
• Total Issued Shares (mn): 1,302

6. Shareholding Structure

• Shanghai Hua Hong Int'l: 26.92%
• Xinxin HK Capital: 13.73%
• Sino-Alliance International: 12.33%

7. Share Performance (Absolute)

• 1-month: -8.7%
• 3-months: -19.9%
• 6-months: -35.9%

8. CMBIGM Ratings

• Stock Ratings:

  • BUY: Potential return of over 15% over next 12 months
  • HOLD: Potential return of +15% to -10% over next 12 months
  • SELL: Potential loss of over 10% over next 12 months
  • NOT RATED: Stock is not rated

• Industry Ratings:

  • OUTPERFORM: Industry expected to outperform the relevant broad market benchmark
  • MARKET-PERFORM: Industry expected to perform in-line with the relevant broad market benchmark
  • UNDERPERFORM: Industry expected to underperform the relevant broad market benchmark

Summary

Hua Hong Semiconductor (1347 HK) reported strong demand and utilization across its 8-inch and 12-inch wafer fabrication capacities in 1Q22. The company is on track to meet its 2Q guidance, driven by robust demand in MCU, IGBT, and analog/PMIC segments. The Wuxi 12-inch Phase II project is progressing well, with capacity expected to reach 94.5kwpm by end-2022, and the factory is anticipated to begin mass production by early 2023. The company also noted that U.S. export restrictions have not impacted its operations due to its certified VEU status and effective export control management. Financially, the company has shown significant revenue growth in FY21, with a P/E ratio of 41.9 and a P/B ratio of 2.7. The stock has experienced a decline in recent months, but the company's management remains optimistic about future performance.