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Investor Notes - Phillip Securities (HK) Ltd
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4 Mar, 2021 (Thursday)

            
IRC(1029)
Analysis¡G
According to its positive profit alert, IRC (1029) is expected to record a profit attributable to Shareholders for the twelve months ended 31 December 2020 of between approximately US$20 million to US$26 million while for the corresponding period in 2019 it recorded a net loss of US$38.7 million. The expected turnaround in the Group`s financial performance is mainly due to the successful ramping up and operation of K&S. The mine operated at a production capacity of 87% in 2020 (2019: 82%). As China`s economy takes the lead in recovering from the global COVID-19 pandemic, large-scale infrastructure projects continue to be launched and the real estate industry continues to grow steadily, , resulting in continued high demand for iron ore in China this year. (I do not hold the above stock)
Strategy¡G
Buy-in Price: $0.235, Target Price: $0.265, Cut Loss Price: $0.22


SF HOLDING(002352.SZ)
Analysis¡G
The company is a leading domestic express logistics integrated service provider. As of the end of 2019, SF Holdings has successfully deployed industrial park projects in 45 cities across the country, with first-mover advantages. Among them, the layout logistics site area is 7089 mu, the total planned construction area is about 4.18 million square meters, and the completed construction area is about 1.51 million square meters. The new crown epidemic has had a far-reaching impact on the global macro economy and logistics industry. After the RCEP is signed, China will promote the accelerated development of new business models and models such as cross-border e-commerce, and cultivate new momentum for foreign trade. With the high growth of cross-border e-commerce, SF Express, the logistics leader, will enter a stage of rapid growth.
Strategy¡G
Buy-in Price: $100, Target Price: $125, Cut Loss Price: $87



Hua Hong Semi (1347.HK) - 2020 Q4 Results

Investment Summary

Hua Hong Semiconductor (the "Company") announced on February 9 the consolidated operating results for the three months ended December 31, 2020 and the annual results for the year ended December last year.

According to the announcement, the Company's sales revenue in the fourth quarter exceeded guidance, reaching a record high of US$281 million, an increase of 15.4% from the same period last year and an increase of 10.7% from the previous quarter. Benefiting from the recovery of the consumer and communications markets and the continuous optimization of the product structure, the gross profit margin was 25.8% also exceeded the guideline. The sales revenue of the Wuxi 12-inch production line in the fourth quarter more than doubled from the previous quarter. During the period, net profit was US$43 million, partly due to an increase in government subsidies of approximately US$14 million. Driven by the 200mm capacity utilization rate reaching 104%, the revenue of its 8 fabs increased by 3.4% quarter-on-quarter; at the same time, the capacity utilization rate of its 12 fabs increased by 19 percentage points quarter-to-quarter to 76%, and revenue comes from the strong demand of China's CMOS image sensor (CMOS ImageSensor, CIS), MCU, IGBT, LED, etc.

In view of the tight supply of the global semi-industry, this coupled with the increase in Hua Hong Semiconductor's operating income. The ideal sales of image sensors (CIS), power management, LEDs, and microcontrollers have offset the negative impact of weak demand for electronically erasable rewritable read-only memory and smart card chips. Taking into account the strong demand in the market, the utilization rate of its 12 fabs has increased faster than expected, and it may continue to drive the rate of utilization this year, and even further expand its production capacity.

The Company's profit for the period was US$28.2 million, compared with US$14 million in the same period last year, increased 101% year-on-year. Operating expenses has decreased 14.3% year-on-year during the period, mainly due to the increase in government subsidies for R&D activities and the net income of other income of US$24.5 million, mainly due to exchange gains and share of an associate's profit increased. The Company's management expects revenue of approximately US$288 million in the first quarter of 2021, with a gross profit margin of approximately 23% to 25%.

Valuation and Investment Recommendation

We believe that based on the Company's sound fundamentals, the Company's capacity expansion is in the positive cycle of the industry, and capacity utilization has reached an unprecedented peak. We raise the Company's 2021 target price-to-book ratio of 3.0x. We respectively raised the Company's 2021/2022 net asset value per share of US$2.66 (+5%)/2.78 (+4.9%), and a twelve-month target price of HK$62.0, corresponding to the market of 2020/2021/2022 net asset value per share is 3.08x/3.00x/2.42x. Maintain accumulate rating. (Exchange rate: 7.78 USD/HKD) (Current price as of March 22)

Financial statements

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Recommendation on 4-3-2021
RecommendationAccumulate
Price on Recommendation Date$ 52.950
Suggested purchase priceN/A
Target Price$ 62.000
Writer Info
Parker Chan
(Research Analyst)
Tel: +852 2277 1527
Email:
parkerchan@phillip.com.hk

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