event: Fudan micro-power on the evening of October 30 released the third quarter of 2023, the company in the first three quarters of revenue of 2.738 billion yuan (YoY +1.25%), the net profit of 0.65 billion yuan (YoY-24.33), net profit of 0.604 billion yuan (YoY-27.75). Corresponding to 3Q23 single quarter, the company achieved revenue of 0.942 billion yuan (YoY-6, QoQ-4.57), the return of net profit of 0.201 billion yuan (YoY-38.88, QoQ-23.04), non-return net profit of 0.189 billion yuan (YoY-40.41, QoQ-19.75).

FPGA revenue continued to grow, the company's first major business. In terms of product lines, in the first three quarters of 2023, the company's revenue from security and identification chips, non-volatile memory, smart meter chips, FPGA and other products, and testing services (after combined offsetting) realized revenue of 6.38, 8.56, 1.89, 9.1 and 0.145 billion yuan respectively, with year-on-year growth rates of -13.57, 19.39, -59.23, 48.61 and -12.41 respectively, revenue accounted for 23%, 31%, 7%, 33% and 5% respectively, of which FPGA and other products continued to maintain high growth against the trend in the face of downward demand in the industry, the company's business structure was further optimized, and FPGA and other products became the company's largest source of business.

short-term pressure on gross margin, research and development costs continue to increase. The company's gross profit margin was 64.58 in the first three quarters of 23 years, down 0.45pct year-on-year, of which Q3 gross profit margin was 59.76 (YoY-5.32pct,QoQ-7.61), mainly due to the company's application in the consumer electronics and power electronics industries, some products were greatly affected by insufficient demand, digestion of early inventory and other factors, and the gross profit margin was under pressure in the short term, however, Q3 single quarter to see the company's security and identification chips, smart meter chips and other revenue has been improved month-on-month trend, is expected with the slow recovery of downstream demand, the company's gross margin is expected to gradually stabilize. In terms of research and development expenses, the company's research and development expenses in the first three quarters of 23 years were 0.758 billion yuan (YoY +35.35%), with a research and development expense rate of 27.68 (up 6.9pct from 2022), mainly due to the company's continuous strong research and development investment, continuous product iteration, continuous enrichment of product sequence to meet more application fields, and strengthening product research and development based on diversified supplier processes, this resulted in an increase in materials and processing costs, depreciation and amortization, and employee compensation for research and development projects in research and development expenses.

new products in many fields are progressing smoothly. While consolidating traditional areas, the company is actively expanding new product lines and applications. In terms of security and identification chips, the company's new products and applications represented by ultra-high frequency EPC tags, anti-counterfeiting security chips and car readers have been recognized by customers. In terms of non-volatile memory, the company actively carries out research and development of high-performance work regulations and car regulations and promotes research and development of system-level storage products. In terms of smart meter chips, the company has increased its investment in research and development of automobiles, smart home appliances, industrial control and other products, and launched a number of products; in FPGA and other products, the company is promoting a new generation of FPGA based on 1xnm FinFET advanced process, for computer vision, machine learning, high-speed digital processing and other application scenarios, for intelligent cockpit, video surveillance, medical imaging, network communications and other fields to provide products.

investment suggestion: considering the company's performance in the first three quarters, the company's net profit attributable to its parent in 23/24/25 was revised to 9.1/10.94/1.454 billion yuan, with the corresponding current price PE being 42/35/26 times respectively. the company is the leading IC design company in China, and FPGA and other high-reliability businesses are the leading domestic technology, maintaining the "recommend" rating.

Risk Warning: Risk of Downstream Market Volatility; Risk of Increased Market Competition; R & D Progress Less Than Expected