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<Research> Citi Raises SMIC (00981.HK) and HUA HONG SEMI (01347.HK) TPs, Positive on 90-Day Performance
Recommend 26 Positive 30 Negative 19 |
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Citi published a research report stating that SMIC (00981.HK) and HUA HONG SEMI (01347.HK) are benefiting from Chinas localization trend, artificial intelligence-related demand, price recovery and expansion of specialty capacity. SMICs 1Q results beat expectations, while its 2Q revenue growth guidance also exceeded market forecasts, mainly supported by improvement in average selling prices, stronger shipment volumes and enhanced order visibility. For HUA HONG SEMI, 1Q revenue from the China market grew 18.7% YoY, with broad-based growth across multiple platforms including MCU, PMIC, embedded memory, standalone flash memory, IGBT and smart card chips. The broker noted that mature nodes of 28nm and above remain SMICs core profit drivers, while the company continues to advance its 14nm and selective 7nm technologies. Management expects 2Q revenue to grow 14% to 16% QoQ, with gross margin ranging between 20% and 22%. Citi believes China localization, AI-related demand and SMICs leadership in advanced nodes among Chinas foundries will support a valuation re-rating. For HUA HONG SEMI, Citi said management expects further room for price increases this year, particularly in NOR flash memory and other supply-tight platforms, with average price hikes of about 10% to 15%, and potentially higher for certain products. In addition, the Wuxi 12-inch wafer fab is expected to reach full utilization in 3Q26. The broker believes AI hardware expansion and the domestic substitution trend will drive strong order momentum for discrete devices and power management products. Citi raised SMICs 2026 and 2027 EPS forecasts by 27% and 27% respectively to reflect improved profitability, and upgraded its investment rating from Neutral to Buy. Based on 4x its average book value per share for 20262027 (previously 3.5x), the TP was lifted from HKD75 to HKD90. Citi also raised HUA HONG SEMIs 2026 and 2027 EPS forecasts by about 7% and 2% respectively, reflecting solid prospects in China localization and power management applications. It reiterated its Buy rating, and based on 5x its average book value per share for 20262027 (previously 3.5x), increased the TP from HKD115 to HKD160. The broker also added both companies to its Adding Upside 90-Day Short-Term View list. (ad/u) Auto-translated by AI This article was automatically translated by AI, the original language version should be considered the authoritative version. AASTOCKS.com Limited does not guarantee its accuracy or completeness and accepts no liability for any damages or losses arising from the use of this translation. More Details
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