Goldman Sachs reiterated Buy on Hua Hong Grace (01347.HK) with a HKD335 12-month target, projecting 11% and 15% quarter-on-quarter revenue growth in 3Q26 and 4Q26 versus 9% in 2Q26. The broker tied the call to the September completion of the 97.5% HLMC stake purchase, which made the unit wholly owned and consolidated, broadening the 12-inch platform. Hua Hong plans roughly 40% more 12-inch capacity at Fab9A by end-3Q26, with full utilization expected in 1H27.
Goldman Sachs reiterated its Buy rating on Hua Hong Grace (01347.HK) with a 12-month target of HKD335, forecasting revenue growth of 11% in the third quarter and 15% in the fourth quarter of 2026, both quarter-on-quarter.
The call rests on the September completion of the company's purchase of a 97.5% stake in HLMC, which made the unit wholly owned and folds its financials into the group's statements. "The acquisition broadens Hua Hong's 12-inch manufacturing platform and supports its long-term capacity and technology node expansion," the broker said in the note.
The 11% and 15% sequential forecasts compare with 9% growth in the second quarter of 2026. Goldman attributed the acceleration to China's AI spending and customers' domestic-substitution strategy, which it said is aimed at securing supply. Generative AI remains the main demand driver, lifting orders for embedded flash memory, NOR flash memory and power management ICs, the broker said.
Hua Hong shares slipped 0.693%, or HKD0.80, in the session covered by the report. Short selling in the stock stood at $396.19 million, equal to 16.984% of turnover, according to data as at Sept. 21, 2026 — a level that leaves the bullish case exposed to a squeeze if the AI capex assumptions behind it hold, and to sharp reversal if they do not.
The capacity side of the thesis is already funded and scheduled. Hua Hong targets adding about 40% more 12-inch wafer capacity to Fab9A by the end of the third quarter of 2026, with full utilization expected in the first half of 2027. The broker said utilization rates remain at high levels, supported by strong demand and technology node migration, and expects that to hold up average selling prices and gross margins.
Goldman's earlier work put China's semiconductor capital expenditure growth at 13%, 15% and 15% in 2026, 2027 and 2028, driven by memory and advanced-node capacity expansion. It estimated the compound annual growth rate of China's potential AI chip market from 2025 to 2030 at 142% in a bull case, 69% in a base case and 6% in a bear case, with market size reaching $4.12 trillion, $678 billion and $66 billion respectively by 2030.
The spread between those scenarios is the real risk in the note. The bull case implies a market roughly 62 times the bear case by 2030, and Hua Hong's valuation now leans on the upper half of that range through the HLMC consolidation and the Fab9A ramp. Morgan Stanley separately described the Greater China semiconductor AI outlook as positive, with memory innovation key, and rates the sector Attractive — a second broker aligning with the same demand story.
For holders, the signal is that the HLMC deal has converted a capacity story into a consolidated earnings story, with the Fab9A ramp as the measurable checkpoint. The next test is the company's third-quarter 2026 results, when investors will see whether the 11% sequential revenue growth Goldman forecasts materializes and whether utilization holds near full levels into the 1H27 target.
This article is for informational purposes only and does not constitute investment advice.
