Earning First Take : Adjusted net income beat the market consensus
- Revenue surged 79% y-o-y to US$ 621m, in line with management’s guidance
- Adjusted net profit to the group rose 195% y-o-y to US$ 110m, ahead of the market consensus by 34%, driven by a better margin
- Management guiding a 3Q22 revenue growth in line with the market expectations
What’s New
– Hua Hong SEMI (1347 HK) announced its 2Q result today after the morning trading session
– Revenue surged 79.4% y-o-y to US$ 621m, in line with the management’s guidance.
– Segment-wise, 8-inch business revenue increased by 35.1% y-o-y to US$ 354.0m, with a gross margin up 12.6 ppts y-o-y.
– 12-inch business revenue rockets 217.1% y-o-y to US$ 266.8m, with a gross margin up 16.3 ppts y-o-y.
– Adjusted net profit(removing the impact of one-off foreign exchange loss) rose 195.4% y-o-y to US$ 109.8 m, beating the market consensus by 34%, mainly due to the better margin caused by sustainable price hike and fast ramping up of new capacity. EPS was US$ 0.064.
– Management is guiding 3Q22 revenue growth of 0.7%, in line with the market expectations.
Our View:
– We expect near-term share price support as the 2Q22 adjusted net profit beat the market expectation.
– 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 maintained at a high level of 109% despite the lockdown in Shanghai.
– Revenue share from China maintain at a high level and industrial and automotive application remained the fastest growing application.
– 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) localisation 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.