Huatai Securities: HUA HONG's price increase and capacity expansion drive growth into the fast lane, target price slightly raised to 121 yuan

Huatai Securities published a research report, indicating that Hua Hong Semiconductor (01347.HK) is entering a fast track for growth driven by price increases and capacity expansion. Its sales revenue for the fourth quarter of 2025 is expected to reach USD 659.9 million, a year-on-year increase of 22.4%, hitting the upper end of the company's previous guidance (USD 650 million to USD 660 million).

Hua Hong's gross margin for the last quarter was 13%, up 1.6 percentage points year-on-year, in line with the previous guidance of 12% to 14%. The company guides that sales revenue for the first quarter of 2026 will remain between USD 650 million and USD 660 million, with a gross margin range of 13% to 15%. Looking ahead to 2026, the firm believes that strong demand for analog and power management driven by AI will benefit the company, which is expected to continue its price increase trend due to its premium capabilities in specialty processes, driving ASP recovery; on the scale side, the ramp-up of capacity at Wuxi Fab 9 combined with the potential integration of Huali Fab 5 may enhance the company's capacity base and profits. The firm raised the target price for Hua Hong's H shares from HKD 120 to HKD 121, maintaining a "Buy" rating