Fubotv earnings beat by $0.10, revenue topped estimates
On Wednesday, UBS analysts issued a downgrade for Hua Hong Semiconductor Ltd (1347:HK) (OTC:HHUSF), adjusting the stock rating from Neutral to Sell and setting a price target of HK$20.00. The downgrade comes as the firm’s stock has seen a significant rally this year, with a 46% increase year-to-date, reaching 1.1 times forward price-to-book value (P/BV), which is within its historical range.
UBS analysts attribute the stock’s recent performance to growing optimism about China’s push for localization and the potential benefits stemming from an operational overhaul under new leadership, with Dr. Bai, a former Global Senior Vice President at Intel (NASDAQ:INTC), at the helm. Despite these positive developments, UBS has decided to downgrade the rating due to several concerns.
Firstly, Hua Hong’s smaller scale compared to Semiconductor Manufacturing International Corporation (SMIC) is highlighted as a disadvantage. The analysts predict that Hua Hong’s efforts to expand its 12-inch wafer production capabilities could lead to a significant increase in depreciation, with growth estimated at 39% in 2025 and 20% in 2026. This expansion is expected to result in a weaker return on equity (ROE) of -0.3% over the next three to four years, in contrast to SMIC’s forecasted 9.3%.
Furthermore, the analysts expect the semiconductor industry’s supply-demand balance to improve slightly from 2025 onward. However, they note that competition remains fierce, particularly in the lower-end microcontroller units (MCUs) and power discrete markets, which are Hua Hong’s main areas of focus. The pricing of Hua Hong’s 55/90nm wafer at approximately $1000 is significantly lower than the industry average of around $1500, indicating the competitive pressures in the mature 12-inch foundry segment for commodity products.
Lastly, UBS points out that any technological advancements, such as an upgrade to 28/40nm processes with broader platform support, will require time to implement, suggesting a potentially challenging path ahead for Hua Hong in its efforts to stay competitive in the semiconductor industry.
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