HUA HONG SEMI's first-quarter performance showed a comprehensive recovery, with both revenue and gross margin meeting guidance, and net profit attributable to the parent company's shareholders surging by 513%. The company concurrently raised its second-quarter profit expectations and disclosed that the proposed acquisition of Huahong Grace Semiconductor Manufacturing Corporation has entered the substantive review stage. On the 14th, HUA HONG SEMI released its 2026 first-quarter report. The company's quarterly sales revenue reached $660.9 million, a year-on-year increase of 22.2%. The gross margin was 13.0%, up 3.8 percentage points year-on-year, with both metrics meeting previous guidance expectations. Net profit attributable to shareholders of the listed company was RMB 139.6 million, an increase of 513.1% year-on-year, primarily driven by improved gross profit from higher average selling prices and increased wafer shipments, as well as favorable changes in foreign exchange gains and losses. Looking ahead to the second quarter, the company expects sales revenue to be between $690 million and $700 million, with the gross margin guidance range raised to 14% to 16%, further widening compared to the first quarter. Simultaneously, the proposed acquisition of Huahong Grace Semiconductor Manufacturing Corporation has been accepted by the Shanghai Stock Exchange and entered the substantive review stage, with expectations for completion in the second half of 2026. Mr. Bai Peng, Chairman and President of the company, stated that the positive demand signals emerging at the beginning of the quarter continued to strengthen throughout the period, providing strong support for the company's performance. However, the significant pull from artificial intelligence on global semiconductor demand and the ongoing uncertainty in the supply chain landscape are intertwined, making the market environment increasingly complex.
Profitability Significantly Recovered, Cash Flow Substantially Strengthened In the first quarter, HUA HONG SEMI's operating revenue (in RMB terms) reached RMB 4.625 billion, a year-on-year increase of 18.22%. Net profit attributable to shareholders of the listed company, excluding non-recurring gains and losses, was RMB 132.7 million, a surge of 724.01% year-on-year. Basic earnings per share were RMB 0.08, a 700% increase from RMB 0.01 in the same period last year. Net cash flow from operating activities amounted to RMB 911 million, a year-on-year increase of 152.29%, mainly benefiting from increased sales collections driven by revenue growth. It should be noted that at the consolidated financial statement level, the company's overall net profit still recorded a loss. The consolidated net loss for the quarter was RMB 127.2 million, but this represents a significant narrowing compared to the loss of RMB 378.4 million in the same period last year. The net profit attributable to the parent company's shareholders turned positive, primarily because minority shareholders at the subsidiary level absorbed a considerable portion of the losses.
12-Inch Capacity Continues to Ramp Up, Capital Expenditure Accelerates Mr. Bai Peng noted in the quarterly report that the ramp-up of 12-inch production line capacity progressed steadily in the first quarter, with its revenue contribution rising to 62.7%. Products based on MCU, standalone flash memory, and BCD processes showed the most significant growth. The 8-inch production lines continued to maintain good profitability. The company's ongoing efforts in cost reduction and efficiency improvement also contributed to the overall performance. Regarding capital expenditure, cash payments for the purchase and construction of fixed assets, intangible assets, and other long-term assets in the first quarter reached RMB 6.417 billion, a substantial increase from RMB 3.664 billion in the same period last year, reflecting the company's continued strong investment in capacity expansion. As of the end of the reporting period, the balance of fixed assets increased to RMB 34.596 billion, while the balance of construction in progress remained at a high level of RMB 14.572 billion. In terms of R&D investment, R&D expenses for the first quarter were RMB 431.5 million, a decrease of 9.54% year-on-year, with the proportion of R&D expenses to operating revenue decreasing from 12.19% in the same period last year to 9.33%.
Acquisition of Huahong Grace Enters Substantive Review, Controlling Shareholder Increases A-Share Holdings Mr. Bai Peng confirmed in the quarterly report that the proposed acquisition of Huahong Grace Semiconductor Manufacturing Corporation has been accepted by the Shanghai Stock Exchange and entered the substantive review stage, proceeding according to the established plan with an expected completion in the second half of 2026. If the transaction is successfully completed, it will further expand the company's production capacity and consolidate its strategic position as a leader in specialty process wafer foundry. Regarding shareholder activities, the company's indirect controlling shareholder, Shanghai Huahong (Group) Co., Ltd., increased its holdings of the company's A-shares by 1.1985 million shares through centralized bidding during the reporting period. As of the end of the reporting period, Shanghai Huahong (Group) Co., Ltd. and Shanghai Huahong International Co., Ltd. collectively held 348.8 million shares of the company, representing approximately 20.06% of the total share capital. Mr. Bai Peng stated that the company will adhere to its strategic goal of being a leading specialty process wafer foundry, continuously focus on market demand, strengthen process capabilities, and enhance production capacity, committed to creating lasting value for shareholders.
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