According to a report published by UBS, Huahong Semiconductor's sales in the first quarter were 460 million US dollars, up 1% from quarter to quarter, shipments increased 8%, and the average selling price fell 6%. Due to increased utilization, gross margin increased from 4% to 6.4% for the previous quarter, slightly above the guidance target of 3% to 6%. The bank gave it a “neutral” rating, and the target price was HK$17. UBS believes that the worst for Huahong is over, but the room for profit margins to rise is limited.
If the following conditions occur, the bank may consider shifting to a more positive view: demand for technology or semiconductors shows stronger signs of recovery; Huahong accelerates the improvement of its 12-inch product portfolio with higher average sales prices and profit margins; and signs of slowing down in the expansion of mature manufacturing plants in China. The bank currently predicts that Huahong's annual revenue will drop 12% year-on-year. As the semiconductor cycle improves, next year's revenue is expected to rise 14% year over year.