Hua Hong Semi reported record 3Q25 revenue of US$635mn (+21%/+12%YoY/QoQ), in line with Bloomberg consensus and guidance. Gross marginrecovered to 13.5% (+1.4ppts/+2.6ppts YoY/QoQ), beating expectations by2.3ppts/2.5ppts. During the period, net profit was US$26mn, 5.3% belowconsensus, although net profit margin improved to 4.1% from 0.7%/1.4% in1Q/2Q. 4Q25 revenue is guided at US$650–660mn (midpoint +21% YoY, +5%QoQ), with GPM of 12–14%. We maintain our FY25 revenue forecast andraise our GPM estimate from 10.9% to 12.0%, reflecting stronger marginrecovery. We lift our FY26 revenue forecast to US$3.2bn, incorporating theplanned fab acquisition, which is expected to close in around August 2026 andadd US$600-700mn in annual revenue. Maintain HOLD with TP adjusted toHK$68.
Operational highlights: ASP uplift and high utilization. Revenue growthwas supported by a 7% QoQ increase in wafer shipments and a 5% QoQrise in blended ASP. The ASP turnaround began in 2Q25, ~80% from priceadjustments and ~20% from mix optimization, and was broad-based acrossall major platforms. Utilization remained elevated at 109.5%, with all 8-inchfabs running above 110% and the main 12-inch fab at ~105%. Fab 9 isramping up steadily, currently loading >35k wpm against >40k capacity, withpeak output of 60–65k wpm expected by mid-2026.
Segments and drivers: NOR Flash and AI in focus. Standalone NVMrevenue surged 164% YoY in 3Q25, led by NOR Flash demand as 55nmvolume ramped up and 40nm prepared for introduction. Analog and powermanagement ICs grew 33% YoY, with an estimated 10-12% of grouprevenue linked to AI server power chips. Auto & industrial contributed ~22%of revenue (industrial 16%, auto 6%), with further growth expected. International revenue accounted for ~18%, supported by the ongoing 40nmMCU collaboration with STMicroelectronics, which remains ahead ofschedule.
Maintain HOLD; TP adjusted to HK$68, based on 2.4x 2026E P/B(previously 1.7x), approximately 10% above 1SD of the 5-year historicalforward average. The revision reflects improved ASP and margin momentumas the business emerges from the cyclical downturn. While we remainpositive on Hua Hong’s strategic positioning in China’s semiconductorlocalization and its ongoing fab expansion, we see current valuations as fairlypricing in near-term prospects. Upside catalysts include stronger demand orfurther ASP increases. Downside risks include weak end-markets, pricingpressure, and geopolitical tensions.