GUOXIN MICRO(SZ:002049)2025-03-12 07:55Summary of Conference Call on Specialty FPGA and LEO Opportunities Industry Overview - Industry: Specialty Field-Programmable Gate Array (FPGA) in the context of Low Earth Orbit (LEO) satellite market in China - Market Opportunity: Estimated revenue opportunity of approximately Rmb1 billion annually for specialty FPGA vendors over the next 10 years due to LEO satellite launches [1][4][48] Key Company Insights Shanghai Fudan Microelectronics - Rating Upgrade: Upgraded to Overweight (OW) due to positive revenue growth and gross margin trends [5][31] - Market Share Expectation: Expected to capture a 70% market share in the specialty FPGA market over the next three years [4][48] - Financial Forecasts: EPS forecasts raised by 40% for 2025 and 43% for 2026; intermediate growth rate increased from 8.5% to 12.5% [5][37][44] - Revenue Growth: 4Q24 revenue was approximately Rmb906 million, reflecting a 2% QoQ and 13% YoY increase [30][31] - Gross Margin Recovery: Gross margin improved to 59% in 4Q24 from 52% in 3Q24 [30][31] Unigroup Guoxin - Rating: Maintained Underweight (UW) due to perceived smaller opportunities compared to Shanghai Fudan [6][31] - Earnings Estimate Revision: Earnings estimate revision breadth turned negative in January 2023, indicating challenges [30][31] Market Dynamics - LEO Satellite Projects: China has filed applications for 51,300 LEO satellites, with major projects planning to launch over 10,000 satellites each by 2035 [3][13][17] - Economic Feasibility: SpaceX's Starlink has demonstrated the economic viability of large-scale LEO satellite deployments, prompting similar initiatives in China [3][13] - Government Policy Influence: Specialty FPGA purchasing aligns with government Five-Year Plans, with expectations for growth in the final year of the current plan (2025) [30][31] Financial Projections - Revenue Estimates: Shanghai Fudan's revenue projections for 2025 and 2026 are Rmb4.39 billion and Rmb5.16 billion, respectively [38][40] - Valuation: Price target for Shanghai Fudan raised to HK$32.80 from HK$13.00, reflecting improved growth expectations [42][45] Risks and Considerations - Potential Risks: Slower-than-expected LEO satellite launches, increased competition in the specialty FPGA market, and potential government resource reallocation could impact growth [36][59] - Market Sentiment: The specialty FPGA cycle is perceived to be bottoming out, with signs of stabilization in downstream orders [25][48] Conclusion - Investment Thesis: Shanghai Fudan is positioned as a key beneficiary of China's LEO satellite initiatives, with strong growth potential and market share expectations, while Unigroup Guoxin faces challenges in capitalizing on the same opportunities [5][31][48]