Jefferies released a research report noting that Hua Hong Grace (01347) delivered second-quarter results in line with expectations, but both gross margin and EBIT exceeded forecasts due to higher average selling prices and effective cost control measures. Net profit underperformed expectations due to lower-than-anticipated other income.

The third-quarter outlook is broadly in line with expectations, with gross margin performing as projected. The firm maintains a "Hold" rating on Hua Hong Grace, raising the target price from HK$91 to HK$140. Jefferies has also increased its gross margin forecasts for 2026 and 2027 by 3.8 percentage points, reflecting a faster-than-expected recovery in margins.

However, intense competition in mature process nodes and ongoing capacity oversupply may still exert pressure on the company's overall profitability.