Goldman Sachs: HUA HONG SEMI (01347) narrows operating losses in the third quarter and exceeds expectations, maintaining target price of HK$117.

Goldman Sachs released a research report stating that it has lowered its earnings forecast for HUA HONG SEMI (01347) for 2025 by 2%, mainly reflecting slightly lower than expected earnings per share in the third quarter; gross profit margin forecasts for 2026 to 2029 have been raised by 0.4%, 0.3%, 0.2%, and 0.1 percentage points respectively, with average capital expenditure forecasts increasing by 1% to 2% during the period; the target price is maintained at 117 Hong Kong dollars, with a "buy" rating. In the third quarter, HUA HONG SEMI reported revenue of 635 million US dollars, representing a year-on-year and quarterly increase of 21% and 12% respectively, in line with guidance; gross profit margin was 13.5%, showing improvements compared to 10.9% in the previous quarter and 12.2% in the same period last year, exceeding the company's guidance and the bank's and market expectations. Operating losses narrowed to 15 million US dollars, better than market expectations, while net profit of 26 million US dollars was 13% lower than the bank's expectations but higher than market expectations, due to increased tax expenses. The company guided for a 2% to 4% quarterly revenue growth in the fourth quarter, with a gross profit margin of 12% to 14%, reflecting continued recovery. In terms of the median calculation, revenue guidance is 7% lower than the bank's and market expectations, while the gross profit margin guidance is 1% and 1.7 percentage points higher than the bank's and market expectations, respectively.