Bank of America Securities issued a research report stating that HUA HONG SEMI's (01347) fourth-quarter 2025 results met expectations, but operating losses persisted. The company reported fourth-quarter sales of $660 million (a 4% increase quarter-over-quarter and 22% year-over-year), at the high end of its guidance. The gross margin was 13%, within the guided range of 12% to 14%, but showed no significant improvement from the 13.5% recorded in the third quarter. The firm anticipates the resumption of dividend payments in 2026. Bank of America Securities raised its target price for HUA HONG SEMI from HK$59 to HK$61, still based on 2 times the forecasted 2026 book value per share of $3.9, and reiterated its "Underperform" rating.

HUA HONG SEMI's operating loss margin widened from 2% in the third quarter to 7% in the fourth quarter, which the report attributes likely to increased operational expenses from the new Fab9. Excluding minority interests, the net loss was approximately $19 million, while including minority interests, net profit was about $17 million. Fourth-quarter earnings per share were 1 cent. The report indicated that HUA HONG SEMI's overall profit margins may continue to face pressure due to the company's ongoing capacity expansion. The new Fab9B is expected to add over 50,000 wafers per month in 12-inch capacity, primarily constructed between 2026 and 2028, leading to higher depreciation costs.

Bank of America Securities expects the company's operating losses to continue into the first half of 2026, followed by a low single-digit operating profit margin in the second half of 2026 and the first half of 2027. Consequently, its return on equity for 2026 and 2027 may remain low at 3% to 4%, compared to the 5% to 10% range for its Chinese semiconductor foundry and packaging and testing peers.