Yamato: HUA HONG SEMI (01347) meets first quarter profit expectations, reiterates "buy" rating.

According to a report released by Daiwa, HUA HONG SEMI (01347) recorded a net profit of 21 million US dollars in the first quarter, a significant increase of 4.6 times compared to the same period last year, due to the low base effect, meeting the bank's expectations and reiterating a "buy" rating. The gross profit margin in the first quarter of 2026 remained stable, with expectations of expansion in the second quarter. Revenue in the first quarter increased by 22% year-on-year, remaining flat on a quarterly basis, to 661 million US dollars. The year-on-year revenue growth was mainly driven by an 18% increase in shipments and a 4% increase in average selling price. On a quarterly basis, despite the impact of the Lunar New Year holiday, both shipments and average selling prices remained stable, indicating strong customer demand. The gross profit margin was 13%, an increase of 4 percentage points year-on-year, remaining flat on a quarterly basis. Management guided that revenue in the second quarter of 2026 is expected to be 690-700 million US dollars, an increase of 4-6% on a quarterly basis, driven by a combination of average selling price and shipments. The gross profit margin is guided to be 14-16%, higher than the 13% in the first quarter. Revenue and gross profit margin guidance are in line with Daiwa's expectations. The bank believes that the company's expansion in the field of global silicon photonics chips, given the significant supply shortage, is a rational choice due to its CMOS and BCD technology advantages. Finally, management indicated that the acquisition of Fab5 will be completed in the second half of 2026. The bank believes that there will be more mergers and acquisitions in 2027 after the integration of Fab5 is completed.