In a report released yesterday, from CMB International Securities downgraded Hua Hong Semiconductor Ltd. to a Hold, with a price target of HK$48.00.
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CMB International Securities’s rating is based on a combination of factors that influenced their decision to downgrade Hua Hong Semiconductor Ltd. to a Hold. The company’s second-quarter results showed a significant increase in revenue and improved gross profit margins, which exceeded expectations. However, despite these positive indicators, the substantial rise in the company’s share price over the past two months has led CMB International to view the stock as fairly valued at its current level.
While the company is expected to continue its growth trajectory with a projected 20% year-over-year revenue increase in 2025, ongoing depreciation expenses pose a challenge to margin improvement. The anticipated stabilization of average selling prices and the company’s strategic role in China’s semiconductor localization are positive aspects. Nonetheless, the current valuation, after a 50% surge in share price, suggests limited immediate upside, prompting the Hold rating. Potential risks include geopolitical tensions and weaker-than-expected demand, which could impact future performance.
In another report released yesterday, DBS also maintained a Hold rating on the stock with a HK$38.00 price target.