For stock investors, the Golden Qilin analyst reports offer authoritative, professional, timely and comprehensive coverage to help uncover potential thematic opportunities. This article examines the joys and concerns behind explosive earnings growth.
It is written by beyond and edited by Xiaobai.
Capital markets never lack stories of earnings explosions. In the 2026 A-share semiconductor sector, Shanghai Fullhan Microelectronics Co.,Ltd. (300613.SZ, the company) delivered a half-year report card impressive enough to catch many investors' eyes. From once being mired in loss-making pressure at the bottom, it surged all the way to a record high in performance. With such dazzling figures on the table, we must calmly ask about the other side of the celebration: Is this surge simply a dividend from the industry cycle, or has the company genuinely opened up a long-term growth ceiling? What risks behind the high growth cannot be ignored?
From the darkest moment to earning 350 million yuan in half a year: don't just look at the surface of high growth
In the first half of 2026, Fullhan Micro's revenue reached 1.46 billion yuan, up 113% year-on-year; net profit attributable to shareholders was 350 million yuan, surging 1,419% year-on-year. Doing a simple calculation, the money earned in just half a year was nearly three times the full-year profit of 2025. (Source: The company's 2026 semi-annual report)
The company's gross margin rose from 37.2% in 2025 to 45.3% in H1 2026, and during the same period, the net margin jumped from 5% to 24.7%, achieving a leap in profitability. But investors who understand cycles would not immediately applaud; their first reaction would be to look back at what happened in the same period last year. (Source: Market Value Fengyun APP)
The first half of 2025 can be described as Fullhan Micro's darkest moment. A long inventory destocking cycle in the security industry weighed heavily on the company, its subsidiary Moucore Technology continued to lose money, gross margin kept declining, and ultimately only 23 million yuan in net profit attributable to shareholders was recorded, with operating profit even turning negative. (Source: The company's 2025 semi-annual report)
The extremely low base from the same period last year is the most direct driver of this year's tenfold year-on-year surge. Quarterly changes reveal the boom more clearly. In the first quarter of 2026, the company's revenue was 560 million yuan, growing to 900 million yuan in the second quarter, up 62% quarter-on-quarter, setting a new single-quarter historical record. In the first half, the company's non-GAAP net profit was 340 million yuan, with non-recurring gains and losses accounting for only 4.2%, meaning the vast majority of profit came from core business operations, not one-time gains such as government subsidies or wealth management income. The company's ROE soared from 0.8% in the same period last year to 11.3%, the result of simultaneous improvement in net margin and asset turnover.
However, this beautiful financial report is not flawless. A glaring contradiction emerged: book net profit was 360 million yuan, but net cash flow from operating activities was negative 90 million yuan. Despite earning a large amount of book profit, the cash in hand was actually decreasing. This is the core doubt we need to dissect next.
Three major businesses soaring together: ballast, accelerator and long-term option
The company's business is divided into three major segments: intelligent video, intelligent IoT, and intelligent mobility, each playing the role of ballast, accelerator, and "long-term option" respectively. The underlying logic of this reversal is hidden right here.
Intelligent video hardware is the company's fundamental business, contributing 60% of revenue in the first half. This segment focuses on security IPC and NVR chips, with downstream customers including security giants Hikvision and Dahua. In the first half, the company's revenue from this segment was 880 million yuan, up 120% year-on-year, with gross margin surging 9.5 percentage points year-on-year to 45.3%. (Source: The company's 2026 semi-annual report)
The recovery mainly came from two forces: after enduring brutal destocking in 2025, AI in 2026 spawned demand for emerging products, downstream orders poured in, and the company stated outright that supply was tight in the first half; on the other hand, memory chips began a price increase wave, and the company successfully passed upstream cost pressure to downstream, raising product prices to boost profits. At the same time, the proportion of the company's new-generation chips equipped with self-developed AI-ISP continued to increase, with products iterating toward higher margins, further boosting segment profitability.
The second segment, intelligent IoT, can be described as the company's fastest-running dark horse. The company's intelligent IoT business includes consumer cameras, AI glasses, and wearable devices. In the first half, revenue was 360 million yuan, up 179.6% year-on-year, with revenue share rising to 25%. The gross margin of the company's intelligent IoT business staged an astonishing jump, rising from 21% in the same period last year to 41.7%, a full 20 percentage point increase. (Source: The company's 2026 semi-annual report)
The sharp recovery in this segment's gross margin partly came from the low base left by the product introduction period in the first half of last year; partly benefited from the explosion in consumer AI hardware demand, with supply-demand reversal bringing improved bargaining power. But we should also pour a bucket of cold water: new terminals like AI glasses are still at an early stage, with shipments only in the tens of thousands. Whether this segment's high growth can continue depends largely on whether the consumer market can truly unlock demand for new products.
The intelligent mobility business is the company's second growth curve. In the first half, this segment's revenue was 190 million yuan, up 62% year-on-year, a growth rate much more moderate than the other two segments, with gross margin slightly declining 1.3 percentage points to 45%. Automotive chips follow different logic from security chips: the chip price for front-installed vehicle models is locked in at the time of installation, making it difficult to pass on costs when memory prices rise, which is the root cause of the slight margin pressure. Short-term profitability is limited, but the strategic value should not be underestimated. The company has obtained ISO 26262 automotive safety certification, its 8-megapixel electronic rearview mirror chip has been deployed in flagship models of leading new energy vehicle makers, and German automakers are also conducting import validation. The company aims to increase the automotive business revenue share from the current 13% to over 20% within 3-5 years.
In simple summary: the company's intelligent video business holds the fundamental position and captured the industry recovery dividend; the intelligent IoT business brings high growth elasticity; the intelligent mobility business can hardly contribute large profits in the short term. The combination of one stable, one fast, and one long-term allows the company to both capture the cycle upturn dividend and anchor itself in the growth stories of edge AI and automotive electronics.
Gross margin soaring: the price increase dividend is sweet but won't last
In the highly competitive chip design industry, raising gross margin by nearly 10 points in half a year is a rather rare achievement. This result was created jointly by price increase transmission and product upgrades, though part of the dividend was granted by the cycle.
Since the second half of 2025, memory has entered a super bull market, with DRAM prices rising 40-70%. For Fullhan Micro's SoC chips, the cost proportion of memory particles has soared. Facing soaring costs, the company chose quarterly dynamic pricing. Downstream customers value supply stability more and have relatively high acceptance of price increases. Peers Guoke Micro and Geke Micro also simultaneously began raising prices, and the entire industry environment provided room for price adjustments. This round of price increases not only covered costs but also earned additional profits.
But we must be clear-headed: of the current gross margin above 45%, memory price increases contributed a considerable portion. Once memory prices turn downward, the company's gross margin will likely see a pullback. Cycle dividends ultimately have a window period.
Secondly, the company's new-generation chips equipped with the Aurora AI-ISP engine have significantly better unit prices and margins than older products. As new product penetration increases, the company's overall gross margin has been boosted. The company still maintains high investment in R&D, with first-half R&D expenses of 190 million yuan, accounting for 13% of revenue, with R&D resources mainly directed toward edge AI chips, AI-ISP, and automotive-grade chips. The company's first Android main control chip completed tape-out in the second quarter of this year and is expected to send out engineering samples in the fourth quarter. (Source: Market Value Fengyun APP)
Fullhan Micro, which previously made vision co-processors, will now directly compete with major main chip players like Qualcomm and Rockchip. This will not generate revenue in the short term, but it is strategically significant. As of the end of June this year, the company held nearly 2 billion yuan in monetary funds, accounting for 43% of total assets; the period-end interest-bearing debt ratio was 16.4%. The company has ample cash and a solid financial structure.
Behind the beautiful profits: cash flow alarm, inventory and receivables are double-edged swords
Returning to the contradiction at the beginning: why is operating cash flow negative when profit growth is so high? In H1 2026, the net cash ratio (negative 25%) shows that the company's profit cash content is insufficient, meaning profits have not been converted into cash, with poor collection and large occupation by receivables/inventory, indicating poor earnings quality. (Source: Market Value Fengyun APP)
In the first half, the company's inventory increased 70% from the beginning of the year, and accounts receivable surged 49%. Together, the two directly dragged operating cash flow into negative territory.
First, inventory. In the environment of rising memory prices, the company chose to lock in wafers and memory raw materials in advance to avoid the risk of further price increases, with inventory scale increasing by 310 million yuan from the beginning of the year. But stockpiling is a double-edged sword. If new memory production capacity is released in 2027 and prices turn downward, the large-scale inventory hoarded at high prices now will face impairment risk.
The other risk point comes from accounts receivable. As of the end of June 2026, the company's accounts receivable scale was 670 million yuan, an increase of 310 million yuan from the beginning of the year. The increase in accounts receivable could be the company relaxing credit to grab market share, or downstream customers facing tight cash flow due to price increases and slowing payments. The 670 million yuan accounts receivable scale is close to 45% of the company's half-year revenue. Once downstream prosperity weakens, the hidden danger of bad debts will surface.
This round of asset expansion is typical of asset-light chip companies: asset increases mainly come from soft assets like receivables and inventory, rather than plants and equipment. The business has grown larger, but asset quality is highly tied to downstream payment collection and smooth inventory digestion. Therefore, in the next 2-3 quarters, investors need to focus on whether the company's accounts receivable are controllable, whether inventory turnover is smooth, and whether operating cash flow can turn from negative to positive. Once these indicators continue to deteriorate, the hidden dangers of short-term expansion could become real trouble.
In this round of earnings explosion, cyclical factors such as memory price increases, downstream restocking, and low base contributed most of the short-term elasticity; structural logic such as AI chips and automotive business represents the future but currently contributes limitedly. The biggest variable in this round—memory price increases—will not have an infinite dividend window. Some institutions predict the price increase rally will likely continue until late 2026 to early 2027, after which new capacity release could cause prices to peak. By then, the company's gross margin may come under pressure, and high-priced inventory will also face a test.
For the company to truly break free from cyclical constraints and move from cyclical rebound to sustained growth, it must let new businesses truly take over the banner before the memory dividend fades. And this major test has only just begun.
Disclaimer: This report (article) is an independent third-party study based on the public company attributes of listed companies and publicly disclosed information (including but not limited to interim announcements, periodic reports, and official interactive platforms) as core basis; Market Value Fengyun strives to make the content and views contained in the report (article) objective and fair, but does not guarantee their accuracy, completeness, timeliness, etc.; the information or opinions expressed in this report (article) do not constitute any investment advice, and Market Value Fengyun assumes no responsibility for any actions taken based on this report.
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