Between October 15 and 16, Shanghai Fudan Microelectronics Group Co Ltd (HKEX: 01385) staged an "expectation reversal" rally. During the October 15 session, the stock fell to an intraday low of HK$21.14, setting a new 52-week low. That same day after the market closed, the company released a positive profit alert for the first three quarters of 2026, forecasting growth in net profit attributable to shareholders of 187.63% to 248.18% year-on-year. On the morning of October 16, the Hong Kong stock rebounded sharply, gaining more than 10% at one point. By the close, Shanghai Fudan Microelectronics Group Co Ltd (HKEX: 01385) was trading at HK$24.84, up 13.11%, with total turnover of HK$272 million. Within a single day, the stock went from a 52-week low to an intraday gain of more than 10%. The key focus of this move was not the absolute magnitude of profit growth, but how the market repriced the quality of the earnings.
The three-step sequence of hitting a new low, issuing a profit alert, and seeing capital flow back tells the full story. By overlaying the price trajectory of the two trading days with the timing of the announcement, the shift in capital expectations becomes clear. October 15 was the last full trading day before the profit warning was disclosed. That day, the Hong Kong stock fell to a low of HK$21.14, marking a new 52-week low, and closed at HK$21.96, down 3.94%. The intraday low was about 3.73% below the closing price. Based on the closing decline, the previous trading day's close was approximately HK$22.86, meaning the stock traded in a low range throughout October 15 and failed to recover by the close. This phase of market behavior was essentially an "uncertainty discount."
After the October 15 close, the announcement landed. Public disclosure shows that Shanghai Fudan Microelectronics Group Co Ltd (HKEX: 01385) released a voluntary disclosure announcement for its first three quarters of 2026 earnings forecast after the market closed that day. The company estimated revenue of approximately RMB 3.45 billion to RMB 3.65 billion, representing year-on-year growth of 14.07% to 20.68%. It estimated net profit attributable to shareholders of approximately RMB 950 million to RMB 1.15 billion, an increase of RMB 620 million to RMB 820 million, or 187.63% to 248.18%. It estimated non-GAAP net profit attributable to shareholders of approximately RMB 700 million to RMB 850 million, an increase of RMB 397 million to RMB 547 million, or 130.97% to 180.47%.
On the morning of October 16, the Hong Kong stock rebounded rapidly on the profit alert, gaining more than 10% at one point, with the share price returning above the HK$24 level. At this point, the three-step sequence of "falling to a new low first, issuing the profit alert after the close, and capital flowing back" was complete, with the price swing spanning nearly 30% of market value elasticity. This kind of "reversal upon landing" intensity seems not uncommon in the Hong Kong market.
Dual Drivers of Core Business Recovery and Fair Value Changes
The quality of Shanghai Fudan Microelectronics Group Co Ltd's (HKEX: 01385) profit alert needs to be broken down from two dimensions: core business recovery and investment elasticity. On the operational side, benefiting from the recovery in the semiconductor industry cycle, the company's diversified product lines including FPGA, security and identification, and non-volatile memory all achieved growth in revenue and overall gross margin. Combined with refined inventory management and dynamically optimized stocking arrangements, inventory write-down losses fell sharply compared with the same period last year. This indicates that the earlier strategy of proactive destocking and structural adjustment has paid off, further confirming an inflection point in core business profitability.
At the same time, non-recurring gains and losses amplified profit elasticity. During the reporting period, the company recognized a relatively large fair value gain on its strategic placement shares in Shenghe Jingwei Semiconductor Co Ltd, and this capital operation dividend was directly reflected in the explosive growth of reported profit. However, it is important to distinguish that such gains are more of a reporting elasticity rather than sustainable operating cash flow. From quarterly data, the positive quarter-on-quarter growth in Q3 non-GAAP profit further strengthens the recovery signal. The announcement disclosed that Q3 single-quarter revenue is expected to be approximately RMB 1.225 billion to RMB 1.425 billion, with non-GAAP net profit attributable to shareholders of approximately RMB 288 million to RMB 438 million, up both year-on-year and quarter-on-quarter.
Structurally, Q3 single-quarter revenue accounted for 35.5% to 39.0% of the first three quarters, and Q3 single-quarter non-GAAP profit accounted for 41.2% to 51.6% of the first three quarters' non-GAAP profit, with single-quarter profit volume already approaching the combined level of the first two quarters of the year. The company itself attributed the changes in this period to several factors: adherence to technological innovation and product iteration, continuous expansion of product application boundaries, driving revenue growth and promoting product structure optimization; recovery in industry prosperity and growth in downstream customer demand, driving revenue and overall gross margin growth across product lines; strengthening refined inventory management and dynamically optimizing stocking arrangements, leading to a sharp decline in inventory write-down losses compared with the same period last year; and increased fair value gains on strategic placement shares adding to non-recurring gains and losses. Among these, the first few items belong to operational improvements, while the last item is a reporting gain, and together they form the "dual drivers" of this profit alert.
Specifically, the FPGA and automotive-grade memory product lines constitute the core growth engines. In FPGA, the company has completed its 28nm PSoC portfolio layout, the first FPAI 32TOPS computing power chip is progressing well in promotion, and it is advancing the development of high-end FPGA products based on 1x nm FinFET advanced process and 2.5D advanced packaging technology. In automotive-grade memory, the company has mass-produced more than 60 AEC-Q100 Grade1 automotive-grade EEPROM products, successfully entering the supply chains of multiple Tier 1 suppliers and OEMs. Its EEPROM products have broken through automotive-grade wide-temperature, ultra-wide voltage, and low-power technical bottlenecks, reaching industry-leading levels in key characteristics such as data erase-write endurance and data retention time. NOR Flash products of 64M and above also achieved both volume and price increases. The centralization of electronic and electrical architecture in new energy vehicles has driven up semiconductor content per vehicle, creating a dual benefit of volume and structure for memory and identification devices.
What Did the October 15 Decline Price In? What Did the October 16 Rebound Repair?
The stock hitting a new low on October 15 reflected market concerns that were not unfounded. On one hand, there is pressure from domestic FPGA capacity expansion and price competition. Domestic FPGA participants continue to increase, peers are densely布局 in the low-to-mid-end LUT segment, price bands have clearly moved lower, and quotes for mainstream automotive-grade devices have been pushed to relatively low levels. The market worries that general-purpose commercial FPGAs are sliding from "scarce domestic substitution" toward "homogeneous competition and price cuts." At the same time, the company still has objective gaps with overseas leaders in general-purpose commercial FPGAs in terms of process, ecosystem, IP and operator richness, and routing resource utilization. The pace of high-end product ramp-up therefore constitutes a decisive variable for the gross margin ceiling. Once the high-end revenue mix improves less than expected, the transmission of declining general-purpose product prices will first show up in the financial statements.
On the other hand, there is the sustainability of downstream demand. The company's description of this recovery is "recovery in industry prosperity and growth in downstream customer demand," but the market needs to distinguish between "customer restocking" and "real end demand." The former brings forward orders, while only the latter supports sustained volume and price improvement. After the profit alert landed, the focus of capital assessment shifted from "whether the profit multiple is sustainable" to "whether non-GAAP and quarter-on-quarter improvements can continue." The statement in the announcement that "Q3 non-GAAP profit increased both year-on-year and quarter-on-quarter" precisely addressed both the second point (demand continuing across quarters) and the third point (profit mainly coming from operations), while the first point (price competition) was also temporarily alleviated by the wording that "revenue and overall gross margin grew across product lines." The essence of this reversal is that the market, through one sharp price swing, re-acknowledged the value of the core business recovery of a domestic chip company.
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