Nomura raises the target price for Huahong Semiconductor by 116% and reaffirms a neutral rating.

Jin10 data reported on May 9 that Nomura issued a report stating that due to Hua Hong Semiconductor (01347.HK) responding to strong local demand, it reiterated a neutral rating and raised the target price by 116%, from HKD 16.4 to HKD 35.4. However, although the group's pricing conditions have improved, the burden of fixed costs may still exist, hence maintaining a neutral rating. The report indicates that Hua Hong Group's first-quarter revenue aligns with its guidance target, while the 9.2% gross profit margin is below expectations. Nomura believes this may be due to depreciation turnover from the new factory. Due to ongoing demand momentum, management predicts a 3.5% quarter-on-quarter increase in second-quarter revenue. Although Hua Hong Semiconductor believes that the 8-inch wafer foundry prices are under pressure (not yet reduced), due to supply shortages, the 12-inch wafer foundry prices are expected to continue to rise. Nomura also believes this is a positive sign for the overall price dynamics of mature nodes wafer foundry in Asia.