Hon Hai (2317) announced its Q3 financial report, Q3 2022 EPS of NT$2.8, better than the previous quarter's NT$2.4 and the same period last year's NT$2.67, and cumulative EPS of the first three quarters of NT$7.32, all record highs for the same period of the previous year! The full-year outlook also maintains growth. As for the Zhengzhou plant, which is a concern to the outside world, Chairman Mr. Liu Yang-wei emphasized that the production capacity is recovering rapidly. The following highlights are organized:

Q3 net income at record high, 2023 outlook neutral
Hung Hai's third quarter results exceeded expectations, with net income after tax reaching NT$38.759 billion, a quarterly increase of 16%, an annual increase of 5%, a record high for the same period in history, and net income per share of $2.8. The cumulative after-tax net income for the first three quarters of the year amounted to NT$101.503 billion, an annual increase of 7%, which is the best for the same period in history, with a net income of NT$7.32 per share. Hung Hai Chairman Liu Yangwei believes that the fourth quarter is expected to grow compared to the third quarter, the same period last year, in which consumer smart products, although affected by the epidemic in Zhengzhou plant, but still expected to grow compared to the previous quarter; overall, the whole year will continue to grow. In addition, Mr. Liu pointed out that the three major variables of next year's inflation, epidemic and international political and economic situation still exist, coupled with the downward revision of the electronics industry's boom, but because of the specificity of Hon Hai's products and more high-end products, it is not subject to the impact of the boom, so the overall ICT business is viewed neutrally.

Four Product Performance
Mr. Liu pointed out that consumer intelligence will still grow, but due to the impact of the Zhengzhou epidemic, the seasonal growth will be lower than before, and is estimated to be a decline compared to the same period last year. Currently, the demand for high-end models is very strong, and although it will affect the gross profit margin, the absolute amount of profit will increase, and we are still aiming at maximizing profitability. In the third quarter, cloud computing products are expected to decline slightly from the previous quarter due to a higher base period. Despite concerns about the server market, cloud service providers (CSPs) are expected to grow compared to the same period last year, driving overall cloud computing revenue to increase annually. As for computer terminals, demand in the computer market is slowing down, but customers are not affected and new products are on the market, so growth will remain strong quarter-over-quarter and year-over-year; components and other products will also grow.

Electric Vehicle and Automotive Semiconductor Layout

Liu Yangwei disclosed that next year will be a very critical year for Hung Hai in the electric vehicle business, electric vehicles and a potential customer of traditional car manufacturers may be landing soon, in addition, and Saudi Arabia PIF set up by the Ceer is expected to next year, you can see the contribution of vehicle design and software. Liu Yangwei said, Hung Yang Semiconductor has completed the development of 1200V silicon carbide MOSFET process, and a number of customers are currently in contact, is expected to start accepting orders for new products at the end of the year, the second half of next year to obtain vehicle certification, and began mass production of SiC, as well as providing services such as simulation testing. In addition, the cooperation with Vedanta in the Indian semiconductor industry is progressing well and we should see good news by the end of the year.

Gross Margin 10% Objective Unchanged
Hon Hai's gross profit margin was disturbed by factors such as product mix and epidemic prevention in Zhengzhou plant in the short term, but it still continued to move forward towards the target of 7% gross profit margin in the medium term and 10% gross profit margin in 2025.