Earning First Take : 1Q22 Net profit surge 211.4% y-o-y, ahead of the market consensus
- 1Q22 profit surged by 211.4% y-o-y, ahead of the market consensus by 25.2%
- The stronger revenue growth due to the robust wafer shipment growth and wafer ASP hike
- Expect both 8-inch and 12-inch foundry businesses to remain in huge demand and potential for further ASP hike
- Expect near-term share price support
What’s New
– Hua Hong SEMI (1347 HK) announced its 1Q result today after the morning trading session
– Revenue surged 95.1% y-o-y to US$ 5.95bn, ahead of the management’s guidance by 6.2%
– Segment-wise, 8-inch business revenue increased by 32.9% y-o-y to US$ 332.6m, with a gross margin up 11.3 ppts y-o-y.
– 12-inch business revenue rockets 379.5% y-o-y to US$ 262.0 m, with a gross margin up 4.7 ppts y-o-y.
– Net profit rose 211.4% y-o-y to US$ 102.9 m, ahead of the market consensus by 25.2%. EPS was US$ 0.079.
– Management is guiding 2Q22 revenue growth of 3.4%, above market expectations by 7.2%.
Our View:
– We expect the share price to react positively to both stronger than expected 1Q22 earnings and 2Q22 revenue guidance.
– The strong performance in profit is due to the robust shipment growth of 12-inch wafers driven by the prolonged chip shortage in the mature process node and the ASP hike in wafer
– Utilization rate of 8 and 12-inch capacity kept at a high level despite the lockdown in Shanghai.
– Revenue share from China keep increasing and revenue from consumer electronics regained the highest growth rate among all applications
– We expect both 8-inch and 12-inch foundry businesses to remain in huge demand and potential for further ASP hike in FY22, supported by (1) the foundry supply tightness in mature nodes, (2) localization of foundry in China, and (3) the long-lasting auto chips shortage.
– We maintain a BUY rating with TP at HK$58.9.
– Analyst call will be held at 4:00 pm today.