BofA Securities released a research report stating that HUA HONG SEMI (01347) reported Q3 sales of $635 million, up 21% year-on-year and 12% quarter-on-quarter, in line with the bank's forecast of $636 million. Gross margin stood at 13.5%, exceeding the guidance range of 10%-12%. The bank reiterated its "Underperform" rating on H-shares with a target price of HK$59.

The report noted that HUA HONG SEMI expects Q4 sales to range between $650 million and $660 million, implying a sequential increase of 2%-4%, with gross margin projected at 12%-14%. Management expressed confidence in further improvement in the average selling price (ASP) of semiconductor wafers in Q4. However, regarding next year's price outlook, the management remains cautiously optimistic due to intense competition. While product mix improvements and technological upgrades may support stable wafer prices, further upside appears limited.

BofA Securities believes that with healthier semiconductor inventory levels in China during the first half of the year, HUA HONG SEMI's wafer prices should see a moderate recovery in H2 2023. However, the bank does not anticipate an immediate chip shortage, making significant ASP increases for wafers in 2024 unlikely.