<News Alert> A-share listing application on STAR board accepted by Shanghai Stock Exchange
- The proposed initial offering size accounts for c.25% of the total shares outstanding, raising Rmb 18.0bn
- FY22F PB of the A-share would be c. 3.4x premised on the proposed offer price, much higher than its H-share
- Rmb 12.5bn of the proceeds will be used to fund a new 12-inch production line with 83K wafter/m capacity
- Expect share price to be well supported as the valuation of the A-share is higher than H-share
– Hua Hong (1347 HK) announced that its listing application on the STAR board has been accepted by Shanghai Stock Exchange after market closed last Friday and is now in progress.
– The proposed initial offering size is 4.33bn shares, accounting for c.25% of total shares outstanding.
– The expected amount of funds raised is Rmb 18.0bn.
– The FY22F PB of the A-share would be c. 3.4x premised on the proposed offer price, much higher than that 1.0x of the H-share currently.
– The proceeds will be used to fund 12-inch capacity expansion at the Hua Hong Wu Xi fab and upgrade of the 8-inch Fabs.
– Rmb 12.5bn of the proceeds will be to establish a 12-inch production line with capacity of 83K wafers/month, which is expected to double its 12-inch capacity in 2025.
– The terms of the offering, including the final size and price range and the timetable of the proposed listing have not been disclosed.
– Hua Hong had applied to list on the SSE STAR board in July 2022.
– We expect share price to be supported as the valuation for the A-share is higher than the H-share currently.
– The proposed listing is expected to unlock the value of Hua Hong.
– The potential 12-inch capacity expansion stated in the prospectus is expected to drive the foundry business’s growth in the coming three years.
– We maintain our BUY rating with TP at HK$53.0 on its robust capacity expansion plan.