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Hua Hong Semiconductor Ltd Shs Unitary 144A/Reg S 01347

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Stock XHKG Rating as of
HKD 17.84 +0.28 (1.59%)
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As of Delayed Price Closed
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Company Report

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Chinese Foundries Face Nascent Recovery, but Easily Disrupted by Geopolitics and New Capacity

Phelix Lee

Our fair value estimates for Semiconductor Manufacturing International Corp. and Hua Hong Semiconductor are unchanged at HKD 10.80 and HKD 16.50, respectively, after both firms reiterated their view of a better second half fueled by a recovery in consumer electronics demand. We view SMIC as overvalued and Hua Hong as fairly valued; SMIC’s expansion is more capital-intensive than Hua Hong's, and it has more motive to cut prices to fill up usage of its upcoming plants. The return of price hikes and upticks in automotive and industrial demand are the main upside surprises to our fair value estimates.

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Price vs Fair Value

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01347 is trading at a 819% premium.
Price
HKD 17.56
Fair Value
HKD 21.20
Uncertainty
High
1-Star Price
HKD 24.83
5-Star Price
HKD 5.30
Economic Moat
Mpxf
Capital Allocation
Xbkgmgcl

Bulls Say, Bears Say

Bulls

Hua Hong can procure from Chinese equipment suppliers as the latter improve their product offerings.

Bears

Aggressive expansion from local peers like Nexchip may erode Hua Hong’s profitability.

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Trading Information

Previous Close Price
HKD 17.56
Day Range
HKD 17.46–18.30
52-Week Range
HKD 13.80–28.40
Bid/Ask
HKD 17.82 / HKD 17.84
Market Cap
HKD 30.62 Bil
Volume/Avg
9.1 Mil / 8.0 Mil

Key Statistics

Price/Earnings (Normalized)
10.87
Price/Sales
1.46
Dividend Yield (Trailing)
—
Dividend Yield (Forward)
0.94%
Total Yield
—

Company Profile

Hua Hong Semiconductor, or Hua Hong, is the second-largest Chinese foundry and the seventh-largest globally. Its current form is a result of an intragroup restructuring completed in 2013. Hua Hong is headquartered in Shanghai with another plant in Wuxi, China, and has sales offices in Japan, Taiwan and the U.S. It employs more than 6,700 employees. Hua Hong’s products are used on smartphones, PCs, for the Internet of Things, data centers, and for automotive and industrial purposes, and so on, but it focuses on more mature process technologies.
Sector
Technology
Industry
Semiconductors
Stock Style Box
Large Value
Total Number of Employees
6,863
Website
https://www.huahonggrace.com

Competitors

Valuation

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Metric
01347
005930
00981
Price/Earnings (Normalized)
 10.8737.0138.08
Price/Book Value
 0.611.510.82
Price/Sales
 1.461.812.51
Price/Cash Flow
 5.189.445.48
Price/Earnings
01347
005930
00981

Financial Strength

Metric
01347
005930
00981
Quick Ratio
 6.061.791.20
Current Ratio
 6.762.591.60
Interest Coverage
 2.128.152.14
Quick Ratio
01347
005930
00981

Profitability

Metric
01347
005930
00981
Return on Assets (Normalized)
 2.43%4.31%1.53%
Return on Equity (Normalized)
 4.58%5.57%3.61%
Return on Invested Capital (Normalized)
 3.04%4.52%0.65%
Return on Assets
01347
005930
00981
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Semiconductors Industry Comparables

Screen in Investor
Ticker
Name
Morningstar Rating for Stocks
Capital Allocation
Economic Moat
Market Cap
NVDA
NVIDIA CorpScftkmmfhWjcgh$2.3 Tril
TSM
Taiwan Semiconductor Manufacturing Co Ltd ADRXyrnpdgckTdts$672.7 Bil
AVGO
Broadcom IncWfxqwhypGvrh$665.6 Bil
AMD
Advanced Micro Devices IncHrdqxfbrjWyxxqbj$243.4 Bil
QCOM
Qualcomm IncPtrhcgprCmnljs$217.2 Bil
TXN
Texas Instruments IncRrswtqnpGby$178.0 Bil
MU
Micron Technology IncHqwfwcqKhz$138.2 Bil
INTC
Intel CorpSmnjzgsbsWwm$133.1 Bil
ARM
ARM Holdings PLC ADRRynjsvwtHpqfd$121.4 Bil
ADI
Analog Devices IncNsccmxyrdPnft$105.1 Bil

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