FIRST SHANGHAI: gives SHANGHAI FUDAN(01385) a "hold" rating. The next generation FPGA products will contribute to revenue in 2026.

FIRST SHANGHAI released a research report stating that SHANGHAI FUDAN (01385) has a "hold" rating with a target price of HK$45.00. The 28nmFPGA product in this quarter saw an increase in quantity but a decrease in price due to market competition, with only a small portion of the 10 billion gate-level products expected to ship in 2025. However, in the 2026 fiscal year, FPGA business revenue is expected to gradually benefit from the increase in shipment volume of 10 billion gate-level products. Future demand for FPGA chips and smart meters from downstream customers will drive the company's revenue growth. It is anticipated that the company's revenue CAGR for the next three years will be 12.7%, corresponding to a net profit CAGR of 25.8%. The main points by FIRST SHANGHAI are as follows: Quarterly Performance Summary The company achieved a revenue of 1.19 billion yuan in Q3 2025, a year-on-year increase of 33.3%. The revenue for each product line was as follows: security and identification chips 240 million yuan, non-volatile memory 340 million yuan, smart meter chips 140 million yuan, FPGA and other chips 440 million yuan, and testing service income 30 million yuan. The gross profit margin was 61.1%, a year-on-year increase of 9 percentage points, mainly benefiting from the increase in FPGA product shipment volume. Operating profit was 140 million yuan, an increase of 98% year-on-year. Net profit attributable to shareholders was 137 million yuan, with non-GAAP net profit of 121 million yuan, a year-on-year increase of 59.2%. Non-GAAP earnings per share were 0.16 yuan, compared to 0.10 yuan in the same period last year. Demand growth in the high-reliability sector, next-generation FPGA products expected to contribute to revenue in 2026 In this quarter, FPGA business revenue increased by 34.7% year-on-year, with orders mainly coming from demand for 28nmFPGA products. The company's 28nmFPGA products have been on the market for 6 years since their successful development in 2018. The next generation 1xnmFinFET FPGA products are expected to contribute to revenue starting in 2026, with the company expected to continue expanding its market share in FPGA products next year. Additionally, programmable chip (PSoC) products based on 1xnmFinFET technology have wide applications in the high-reliability and industrial control sectors, with PSoC products currently accounting for 25% of FPGA business revenue. Looking ahead to the 2025 fiscal year, the company's FPGA business revenue is expected to achieve a year-on-year growth of 38.6% to reach 1.47 billion yuan. Non-volatile storage business revenue increased by 44.1% year-on-year, with rapid growth in automotive-grade MCU sales Revenue from smart meter products in this quarter increased by 40.8% year-on-year, with rapid growth in sales of smart home appliances and automotive-grade MCUs. Due to precise cost control, this business still has room for growth in gross profit margins. Influenced by rising storage prices, Q3 non-volatile storage business revenue increased by 44.1% year-on-year, with high-reliability products accounting for 70%. Q3 revenue from security and identification business increased by 15.5% year-on-year, with sales growth in chips for finance, social security cards, etc., but currently facing fierce market competition and not having strong technological barriers. Risk Warning Risk factors include lower-than-expected product sales, price adjustments, intensified market competition, slower-than-expected progress in research and development, and restricted production capacity.