Goldman Sachs: Huahong Hongli (01347) welcomes AI chip opportunity to acquire Hualiwei expands technology node and reaffirms “buy” rating

The Zhitong Finance App learned that Goldman Sachs released a research report stating that it maintains the “buy” rating of Huahong Hongli (01347) H shares, with a target price of HK$335 for 12 months. The bank has a positive view of the company. Revenue for the third quarter and fourth quarter of 2026 is expected to increase by 11% and 15%, respectively, higher than the 9% quarterly increase in the second quarter of 2026, mainly driven by China's AI spending and the customer's “domestic goods first” strategy to better ensure supply.

The bank stated in an earlier report that China's semiconductor capital expenditure is expected to increase by 13%, 15% and 15% respectively from 2026 to 2028, driven by the expansion of storage and advanced node production capacity; it also estimates that the potential market size of China's AI chips will grow at a compound annual rate of 142%, 69%, and 6% under bull, benchmark and bear market scenarios, respectively, reaching US$4.12 trillion, US$678 billion and US$66 billion by 2030, reflecting the opportunities facing Huahong.

The bank pointed out that Huahong continues to expand production capacity, and the capacity utilization rate remains at a high level, driven by strong demand and technology node migration. Generative AI is still the main driving force, driving the demand for embedded flash memory, NOR flash memory, and power management ICs. Huahong completed the acquisition of 97.5% of Huali Microelectronics's shares in September. Hualiwei later became a wholly-owned subsidiary and consolidated into the Group's financial statements. The bank anticipates that the acquisition will expand Huahong's 12-inch manufacturing platform and support the expansion of its long-term production capacity and technology nodes.

The bank anticipates that strong demand will support capacity utilization, average sales price and gross profit margin. The company aims to increase Fab9A's 12-inch wafer production capacity by about 40% by the end of the third quarter of 2026, and reach full capacity in the first half of 2027.