FPGAs are moving to 1xnm FinFETs and have been introduced to some customers. The company has provided tens of millions of gates, 100 million gates and billions of gates FPGA products and PSoC products, with the whole process of independent intellectual property rights FPGA supporting EDA tools. It has formed a rich lineage of FPGA and PSoC products, and the series of products have been widely used in network communication, video and image, power equipment, industrial control and high reliability. In the first half of '24, the company completed the tape-out of a new generation of PSoC products, and actively promoted the productization of a new generation of FPGA and PSoC products, and in the future, it will combine advanced packaging technology to further enrich the lineage on the new generation FPGA platform, and continue to launch more competitive FPGA, PSoC and FPAI products.

A number of next-generation FPGA products based on the advanced 1xnm FinFET process have completed sample testing, and have been sold in small batches for some imported customers, and yield improvement work has been carried out simultaneously, and pedigree products are planned according to market conditions. It further expands the product lineage of the 28nm process and enriches the product category; Complementary EDA software complements the IP to improve ease of use.

MCUs further enrich the product lineup and expand downstream fields. In the first half of 24 years, the company's MCU products completed the development and tape-out of 12-inch 55nm and 90nm embedded flash memory process platforms, and initially completed the productization of domestic 12-inch 90nm embedded flash memory platforms, and actively promoted the productization of domestic 12-inch 55nm embedded flash memory platforms, and will realize the complete layout of 12-inch and 8-inch process platforms in the future, further enrich the product lineup, and expand the market share of key industries such as public utilities, smart home appliances, automotive electronics, and industrial control. In the future, a variety of high-capacity, high-reliability, high-performance industrial and automotive-grade MCU products based on the 12-inch process platform will be gradually launched. The new generation of smart meter master control chip based on 55nm embedded flash memory process has completed sample testing, and the reliability assessment is progressing smoothly, and is in the stage of sample delivery and small batch production at the client. The new generation of automotive MCUs has completed tape-out and assessment, and some customers have completed fixed-point and started small-scale mass production. At the same time, the certification of the ISO26262 system will be completed in the first half of 2024, and the certification of multiple products is progressing steadily. The large-capacity white goods main control MCU has achieved stable mass production in key customers, and the new generation of products has completed sample testing and started to send samples to customers.

Earnings Forecast and Investment Advice: We believe that the company is vigorously exploring new fields and new markets in the context of consolidating its core competitiveness such as FPGA, and the growth potential is worth looking forward to. We expect that the company's corresponding EPS in 24-26 years will be 1.01/1.24/1.54 yuan/share respectively. Combined with comparable companies, the 25-year PS valuation range is 8-9x, corresponding to a reasonable value range of 43.31-48.72 yuan, and a "better than the market" rating is given.

Risk warning: intensified competition in the industry; Orders fall short of expectations; Supply chain risk.