Hua Hong Grace (1347.HK): ASP recovery confirmed, earnings upcycle ahead; upgrade to Buy; raise PO to HK$105

BofA Securities upgrades Hua Hong Grace to Buy from Underperform and lifts its price objective to HK$105 from HK$69. Wafer ASP reached US$517 per wafer in 3Q26, up 11% QoQ and 14% YoY, the strongest sequential growth in the past ten years; management confirmed wafer capacity is in significant shortage with about 50% of orders unfulfilled, and expects 10-15% YoY ASP increases in both 2026 and 2027. Excluding Fab5, 3Q26 revenue was US$803mn, up 12% QoQ and 26% YoY, above the guided US$770-780mn, driven by MCU, NOR flash and PMIC demand. Fab5 added US$184mn of revenue at a 45% gross margin versus the 25% company average. Management estimates over 50% of products ultimately serve AI-related end-markets and plans significant capacity expansion in power management and silicon photonics in 2027. The target P/B multiple rises to 3x from 2x.