BOC International: Maintaining Huahong Semiconductor's (01347) “Buy” Rating Target Price of HK$91

The Zhitong Finance App learned that BOC International released a research report stating that Huahong Semiconductor (01347) plans to acquire more than 97.5% of Shanghai Huali Microelectronics's shares at a price of 8.268 billion yuan. The bank believes that after the transaction is completed, Huahong Semiconductor's profit scale and earnings per share will further expand, maintaining Huahong Semiconductor's “buy” rating and target price of HK$91.

From a financial perspective, Hualiwei focuses on production lines that may have basically completed equipment depreciation. After integration, the overall profit level may be stronger than the average profitability of Huahong Semiconductor's existing production line. The bank believes that the acquisition of Hualiwei will further enrich and consolidate Huahong Semiconductor's product matrix and enhance product collaboration capabilities. At the same time, it is believed that the integration of Hualiwei is Huahong Semiconductor's fulfillment of its market promise when it was listed on A-shares in 2023. After this transaction, the actual holding relationship between Hualiwei and Huahong Semiconductor remained unchanged, and it was in line with the development trend of professional integration in the mainland's integrated circuit industry.

For shareholders of listed companies, this consolidation is expected to increase profitability per share. Furthermore, after the integration is completed, Huahong Semiconductor's share in the global foundry market is expected to further increase, and supply capacity in characteristic process fields may increase. The bank also believes that fundraising may help the group upgrade production line and further expand production to enhance R&D capabilities.