Bank of America Securities: Reiterates underperform rating on HUA HONG SEMI (01347), management cautiously optimistic about next year.

Bank of America Securities released a research report stating that HUA HONG SEMI(01347) had sales of 635 million US dollars in the third quarter, a year-on-year increase of 21%, and a quarterly increase of 12%, in line with the bank's forecast of 636 million US dollars; gross profit margin was 13.5%, exceeding the guidance range of 10% to 12%. The bank reiterated its "underperform the market" rating on HUA HONG H shares with a target price of 59 Hong Kong dollars. The bank mentioned that HUA HONG expects sales in the fourth quarter of this year to be between 650 million and 660 million US dollars, indicating a quarterly increase of 2% to 4%, with a gross profit margin of 12% to 14%, and is confident that the average selling price of semiconductor wafers will further improve in the fourth quarter. However, regarding price outlook for next year, the management is only cautiously optimistic, as intense competition suggests limited room for further increase in wafer prices, despite improvements in product portfolio and technological upgrades. The bank believes that due to healthier semiconductor inventory levels in China in the first half of the year, wafer prices for the second half of the year for HUA HONG are expected to gradually increase, but there is no expectation of immediate chip supply shortage. The opportunity for further increase in wafer sales prices next year seems limited.