[Click eStock] "FADU's Valuation Multiple Expected to Surpass Competitors"

Shinhan Initiates Coverage on FADU
"Technological Prowess to Stand Out Further"

Shinhan Investment Corp. has initiated coverage on FADU with a target price of 130,000 won and a 'Buy' investment rating.

On May 13, Seonggyu Heo, a research analyst at Shinhan Investment Corp., stated, "We believe FADU's technological prowess, which has demonstrated significant superiority in random read/write performance due to increasing demand for RAG-based inference eSSDs (enterprise solid-state drives), will become even more prominent," adding, "FADU's valuation multiple is expected to surpass those of its competitors over the mid- to long-term."

FADU is a fabless company specializing in the design of NAND controllers for eSSDs. In 2022, the company recorded sales of Gen3 controllers to major North American big tech companies. However, in 2023, due to a downturn in the memory market, customers completely canceled the adoption of Gen4 controllers. Subsequently, there was controversy over the company's public listing, but since last year, orders that had been deferred since Gen5 have materialized. It is now known that FADU has secured three hyperscaler clients and one NAND manufacturer, and is in discussions with additional customers.

Analyst Heo assessed that FADU has ample potential to outpace its competitors. He explained, "Microchip and Marvell design their products using ARM architecture-based cores, which are relatively high-performance and high-cost compared to RISC-V. However, compared to FADU's architecture, which separates firmware and hardware accelerators, their products generate more heat. We expect FADU to have advantages in every respect, including total cost of ownership (TCO) and bill of materials (BOM)." He further stated, "In fact, in Gen5, Microchip's performance was judged inferior, and in Gen6, Marvell is expected to lag behind."

The analyst also projected that FADU's market share could expand to 10% by 2028. "Taking into account all disclosed controller specifications and market research data, it is estimated that among integrated device manufacturers (IDMs), SanDisk (with a 4% share) and Kioxia (with 8%) source controllers from third-party fabless companies," he said. "Assuming over 100 million NAND controllers will be produced in 2028, FADU's market share is projected to reach 10%," he added.

He also predicted, "Additionally, there will be a gradual increase in demand as hyperscalers directly procure NAND and manufacture eSSDs without going through IDMs."