Morgan Stanley maintains "in line with the market" rating for HUA HONG SEMI (01347), with a target price raised to 17 Hong Kong dollars.

Morgan Stanley released a research report stating that it has raised the target price of HUA HONG SEMI (01347) by 8%, from 15.8 Hong Kong dollars to 17 Hong Kong dollars. The earnings per share forecast for 2024-2025 has been increased, and a forecast for 2026 has been introduced, while maintaining a "market perform" rating. With its flexible pricing policy, Hua Hong still poses a threat to other mature peer foundries. The company's production capacity is currently at full capacity, so if demand rebounds, its pricing may become more stable. The bank pointed out that Hua Hong's gross margin in the first quarter of 2024 roughly met its guidance, but operating profit margin exceeded expectations, benefiting from other one-time revenues. The average selling price (ASP) decreased by 7% per quarter, with an overall utilization rate of 91.7%, up from 84% in the fourth quarter of the previous year. The gross margin was 6.4%, slightly better than the 4% in the previous quarter. The company's guidance for the second quarter of 2024 is generally in line with expectations, benefiting from improved utilization rates and gradually improving gross margins.