KGI Securities noted in its report regarding Hana Microelectronics Public Company Limited (SET: HANA) that the company reported an unusually high other income of 340 million baht for the first quarter of 2025, largely attributed to a technology transfer to First Thai Sic Fab (FT1), valued at 238 million baht.
Omitting this one-time gain, HANA’s core earnings for the quarter stood at 220 million baht, marking a 53% increase year-on-year and a recovery from the net loss in the fourth quarter of 2024.
FT1, a joint venture between PTT Public Company Limited (SET: PTT) and HANA, serves as a semiconductor foundry focused on silicon carbide. Future technology transfers remain uncertain, pending decisions from the joint venture. HANA has declined to provide additional details as PTT holds a majority stake.
While direct sales to the U.S. constitute approximately 12% of HANA’s sales, around 31% of its sales reach the U.S. indirectly. Due to the uncertainty surrounding tariffs, the company’s management is cautiously evaluating the situation and exploring ways to reduce Chinese-sourced materials in goods destined for the U.S.
As a result, the analyst anticipates HANA’s sales in the second quarter of 2025 to be either flat or slightly decrease quarter-on-quarter, as clients express concerns over tariffs.
HANA is transferring its silicon production to a manufacturer in China, with the first phase expected to conclude by the end of the third quarter of 2025 and the second phase by the end of the first quarter of 2026. Despite a weak market for both silicon and silicon carbide due to heightened competition, this production shift is anticipated to mitigate operating losses.
Reflecting on the first-quarter results and a softer forecast, KGI has adjusted earnings projections for HANA, reducing the company’s sales outlook by 2%, revised foreign exchange assumptions, and adjusted gross margin estimates. These changes modestly increased core earnings projections by 2% for 2025 and 2026.
Furthermore, the analyst also adjusted HANA’s price-to-earnings ratio from 12.0x to 15.0x in anticipation of potential earnings improvements in the latter half of 2025. This adjustment acknowledges uncertainties stemming from the ongoing trade tensions after the temporary 90-day tariff exemption between the U.S. and China.
Consequently, KGI Securities raised HANA’s 2025 target price from 15 baht to 19 baht per share, maintaining a ‘Neutral’ rating and advising investors to monitor second-quarter performance and any developments in U.S. trade negotiations.
