In "The Big Banks," China International Capital Corporation raised the target price for Hua Hong to 94.5 yuan as AI-related demand continues

CITIC International's research report indicates that Hua Hong Semiconductor (01347.HK) had solid performance in the third quarter, with revenue meeting expectations, but gross margin showed strong performance, rising 2.6 percentage points quarter-on-quarter to 13.5%, mainly driven by wafer shipment volume, average selling price (ASP), and capacity utilization exceeding expectations; however, due to high depreciation, net profit still did not meet targets. The outlook for the fourth quarter is mixed.

CITIC International stated that Hua Hong Semiconductor's management guided revenue for the fourth quarter of 2025 to be between USD 650 million and USD 660 million, with gross margin expected to remain stable (2 percentage points higher than market consensus), mainly driven by price increases and demand growth in most sub-segments of discrete components, but discrete components remain a drag.

CITIC International maintains its revenue estimates for Hua Hong Semiconductor largely unchanged, but considering the strong rise in average selling prices under full capacity in the second half of 2025, it raised its gross margin forecast by 50 to 79 basis points. However, the price war in discrete power components, rising engineering costs, and depreciation expenses may limit short-term margin upside. CITIC International raised its earnings per share estimates for 2026 and 2027 by 5% and 4%, respectively.

CITIC International believes that Hua Hong will continue to benefit from strong domestic substitution momentum and AI-related demand; it maintains a "Buy" rating, based on a forecasted price-to-book ratio of 3.2 times, with a target price raised from HKD 51.1 to HKD 94.5