Cautious Outlook for Hua Hong Semiconductor Amid Revenue Growth and Margin Pressures

DBS analyst Jim Hin Kwong Au has maintained their neutral stance on 1347 stock, giving a Hold rating on May 8.

Jim Hin Kwong Au’s rating is based on several factors, including Hua Hong Semiconductor Ltd.’s recent earnings performance and future outlook. The company’s first-quarter earnings for 2025 fell short of expectations, despite a notable year-over-year revenue increase of 17.6%. This shortfall was primarily due to a lower-than-expected gross margin of 9.2%, which was impacted by rising depreciation costs from capacity expansions.
Furthermore, the management’s guidance for the second quarter of 2025 suggests a cautious revenue growth forecast of 14.9% to 19.1% year-over-year. Although Hua Hong is poised to benefit from trends such as the localization of electronics manufacturing and increased demand in the automotive sector, ongoing economic uncertainties and persistent pressure on average selling prices (ASP) for mature-node foundries limit the stock’s near-term upside potential. Consequently, the target price is set at HKD30.0, reflecting a conservative valuation approach.

In another report released on May 8, Nomura also maintained a Hold rating on the stock with a HK$35.40 price target.