FMSH(SH:688385) Huachuang Securities·2024-03-26 16:00Investment Rating - The report maintains a "Strong Buy" rating for Fudan Microelectronics (688385) with a target price of 38.9 CNY / 17.1 HKD, compared to the current price of 31.93 CNY / 10.80 HKD [1][2]. Core Views - The company's high-reliability business continues to grow significantly, while its consumer products business is expected to recover [2]. - In 2023, the company reported a revenue of 3.536 billion CNY, a slight decrease of 0.07% year-on-year, with a gross margin of 61.21%, down 3.46 percentage points [2]. - The net profit attributable to shareholders was 719 million CNY, a decline of 33.18% year-on-year, and the non-recurring net profit was 572 million CNY, down 43.84% [2]. - The fourth quarter of 2023 saw a revenue of 798 million CNY, a year-on-year and quarter-on-quarter decrease of 4.37% and 15.25%, respectively [2]. Summary by Sections Financial Performance - The company experienced a decline in consumer product revenue, with safety and identification chips, smart meter chips, and integrated circuit testing services generating revenues of 863 million CNY, 274 million CNY, and 185 million CNY, respectively, down 11.62%, 53.96%, and 15.44% year-on-year [2]. - Conversely, the high-reliability business, including non-volatile memory and FPGA products, achieved revenues of 1.072 billion CNY and 1.131 billion CNY, respectively, with year-on-year growth of 14.03% and 44.80% [2]. Future Outlook - The company is expected to return to a growth trajectory as new high-reliability products are launched and demand for MCU and other downstream products recovers [2]. - The company has a significant technological advantage in high-reliability products, with PSoC chips contributing 440 million CNY to FPGA and other chip revenues in 2023, maintaining a growth rate of over 50% since their launch in 2021 [2]. - The MCU and non-volatile memory businesses are gradually recovering from a downturn, with expectations for future growth as inventory adjustments are completed [2]. Investment Recommendations - The report suggests that Fudan Microelectronics, as a well-established IC design company, will continue to benefit from domestic substitution opportunities, with FPGA products entering a harvest phase [2]. - The net profit forecasts for 2024 and 2025 have been adjusted to 838 million CNY and 1.057 billion CNY, respectively, with corresponding EPS of 1.02 CNY and 1.29 CNY [2]. - The target price corresponds to a PE ratio of 38 times for 2024, maintaining a "Strong Buy" rating [2].