FIRST SHANGHAI has issued a research report maintaining a "Hold" rating on SHANGHAI FUDAN (01385) with a target price of HK$45.00. The firm noted that while the 28nm FPGA products faced volume growth but price declines due to market competition in the current quarter, the 10-billion-gate products will see limited shipments in 2025. However, FPGA business revenue is expected to gradually benefit from increased shipments of 10-billion-gate products starting in FY2026. Future revenue growth will be driven by FPGA chip demand from downstream clients and smart meter applications. The company’s revenue CAGR is projected at 12.7% over the next three years, with a net profit CAGR of 25.8%.

Key highlights from FIRST SHANGHAI’s analysis include:

**Quarterly Performance Summary** In Q3 2025, SHANGHAI FUDAN reported revenue of RMB 1.19 billion, up 33.3% YoY. Revenue breakdown by product line: - Security & identification chips: RMB 240 million - Non-volatile memory: RMB 340 million - Smart meter chips: RMB 140 million - FPGA & other chips: RMB 440 million - Testing services: RMB 30 million

Gross margin improved to 61.1%, up 9 ppts YoY and 5.5 ppts QoQ, primarily due to higher FPGA shipments. Operating profit surged 98% YoY to RMB 140 million. Net profit attributable to shareholders reached RMB 137 million, with adjusted net profit at RMB 121 million, up 59.2% YoY. Adjusted EPS was RMB 0.16, compared to RMB 0.10 in the same period last year.

**Growth in High-Reliability Sectors; Next-Gen FPGA to Contribute from 2026** FPGA business revenue grew 34.7% YoY this quarter, driven by demand for 28nm products. The company’s 28nm FPGA, launched in 2018 after six years of R&D, will be succeeded by 1xnm FinFET-based FPGA products expected to generate revenue from 2026, further expanding market share. Additionally, programmable system-on-chip (PSoC) products based on 1xnm FinFET are gaining traction in high-reliability and industrial control applications, currently accounting for 25% of FPGA revenue. For FY2025, FPGA revenue is forecast to grow 38.6% YoY to RMB 1.47 billion.

**Non-Volatile Memory & Smart Meter Growth** Non-volatile memory revenue rose 44.1% YoY, with high-reliability products making up 70% of the segment. Smart meter revenue increased 40.8% YoY, supported by strong demand for smart home appliances and automotive-grade MCUs. Cost control measures are expected to sustain margin expansion.

**Security & Identification Business** Revenue from security and identification chips grew 15.5% YoY, driven by financial and social security card chips, though competition remains intense with low technical barriers.

**Risk Factors** Potential risks include weaker-than-expected sales, price adjustments, intensified competition, R&D delays, and capacity constraints.