HK Stock Market Move | HUA HONG SEMI (01347) continues to rise by over 4%, and the new 12-inch production line in Wuxi will gradually start production this year, and will continue to climb steadily over the next two years.

Hua Hong Semi (01347) rose by over 4%, reaching 4.44% at the time of writing, trading at 35.3 Hong Kong dollars with a turnover of 1.025 billion Hong Kong dollars. Huaxing Securities released a research report stating that the new president of Hua Hong Semi, Bai Peng, clarified the growth driver strategy of Hua Hong as a specialty process platform during the performance conference call. The bank believes that Bai Peng's plan to migrate some products to more advanced processes to improve performance and efficiency is reasonable, the background of implementing this growth plan is very favorable, and the path of being based in China and serving China will become more prominent. Compared with overseas competitors, Hua Hong is competitive in pricing. The new 12-inch production line in Wuxi will gradually start production this year, and will continue to ramp up from 2026 to 2027. The report also points out that Hua Hong is approaching the scheduled time point for the production integration of its subsidiary, Hua Li Microelectronics. Among the three wafer factories operated by Hua Li Microelectronics, Wafer Fab 5, which started production in 2015, is close to the end of its depreciation period. Based on the data from 2024, the bank estimates that the potential integration of Wafer Fab 5 could bring Hua Hong approximately USD 100 million in incremental operating profit. Furthermore, the integration of advanced processes of 28 nanometers and above will further solidify Hua Hong's product portfolio and growth prospects. Considering these factors, the bank notes that the forward P/B ratio of Hua Hong for the full year of 2024 is below 1, and believes that Hua Hong should be revalued based on its P/B ratio.