event: Fudan microelectronics released its first quarter report for 2024 on the evening of April 29. in 2024, the company realized Q1 revenue of 0.893 billion yuan (YoY +10.3%,QoQ +11.84%), net profit of 0.161 billion yuan (YoY-14.35, QoQ +132.5%), and net profit of 0.155 billion yuan (YoY-13.93, quarter-on-quarter turnaround).

1Q24 revenue and gross margin improved month-on-month. In 2023, the company's downstream demand was somewhat divided. The demand for some chips represented by consumer electronics products declined, and the revenue and gross profit margin were under pressure simultaneously. However, the revenue of FPGA and some non-volatile memory used in high-reliability scenarios increased steadily, resulting in a slight decline of 0.07 in the company's revenue and a decline of 3.46pct to 61.21 in the comprehensive gross profit margin in 2023. In the first quarter of 2024, the downstream demand for some products used in the consumer electronics and power electronics industries of the company stabilized and rebounded. The revenue of smart meter chips achieved a high growth of 95.74 year-on-year in 1Q24. At the same time, the demand for highly reliable products such as FPGA and non-volatile memory of the company increased steadily, driving the company's operating income to achieve a month-on-month growth. The company's comprehensive gross profit margin also increased by 6.98pct to 56.65.

FPGA and other high-reliability business to maintain rapid growth, the smooth progress of new products. In 2023, the company's five major product lines, including security and identification chip/non-volatile memory/smart meter chip/FPGA and other products/integrated circuit testing services, will achieve revenue of 8.63/10.72/2.74/11.39/0.185 billion yuan respectively, with year-on-year growth rates of -11.62/14.03/-53.96/44.80/-15.44 respectively, operating income as a percentage of the company's total revenue was 24%/30%/8%/32%/5%, and the year-on-year change in gross margin was -18.57/-1.03/-24.91/-0.11/17.16pct, respectively. The company's FPGA and other products in 2023 to maintain the trend of high growth, become the company's largest source of revenue, the company's FPGA and high reliable storage to benefit from better product performance and stable market demand, operating income to maintain rapid growth while the product line gross margin remained basically stable. At present, the company has been able to provide four series of products in the FPGA business field: 10 million-gate FPGA chips, 100 million-gate FPGA chips, 1 billion-gate FPGA chips and embedded programmable devices (PSoC). At the same time, the company has introduced FPAI, a reconfigurable chip integrating FPGA and AI for artificial intelligence applications. It is promoting a new generation of FPGA and intelligent reconfigurable SoC with advanced process technology of 1xnm FinFET, which is expected to maintain domestic leadership and continuous business growth.

continue to increase investment in research and development, to maintain the leading domestic technology. In 2023, the company will continue to strengthen research and development investment to maintain product iteration and product pedigree expansion, and strengthen product research and development based on diversified supplier processes. In 2023, the company's research and development personnel increased by 293 to 1178 people, and the annual research and development investment was 1.19 billion billion yuan, an increase of 34.25 year-on-year. The company is simultaneously advancing projects including but not limited to the development and industrialization of a new generation of FPGA platform, intelligent reconfigurable SoC platform development and industrialization, etc., for the company's medium-and long-term business development ahead of the layout.

investment advice: it is estimated that the company's net profit attributable to its parent in 24/25/26 is 9.98/12.97/1.639 billion yuan respectively, and the corresponding current price PE is 27/20/16 times respectively. the company is the leading IC design company in China, and FPGA and other high-reliability businesses are leading in domestic technology, maintaining the "recommend" rating.

risk tips: the risk of downstream market volatility; the risk of increased market competition; research and development progress is not as expected.