arcadestation| UBS: Give Huahong Semiconductor a "neutral" rating target price of HK$17

UBS released a research report stating that it awarded Huahong Semiconductor (01347) a "neutral" rating with a target price of HK$17. Company sales in the first quarter 4arcadestationUS$.60 million, a quarter-on-quarter increase of 1%, shipments increased 8%, and average selling prices fell 6%. Due to increased utilization, gross profit margin increased from the previous quarterarcadestation4% to 6.4%, slightly higher than the guidance target of 3% to 6%.

The bank believes that Huahong's worst situation has passed, but there is limited room for profit margin growth. The bank may consider turning to a more positive view if there are signs of stronger recovery in China's technology or semiconductor demand; Huahong accelerates the improvement of its 12-inch product portfolio with higher average selling prices and profit margins; and the expansion of China's mature process foundries shows signs of slowing. The bank currently predicts that Huahong's full-year revenue will fall by 12% year-on-year. As the semiconductor cycle improves, revenue next year is expected to rebound by 14% year-on-year.

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