FII(SH:601138) Goldman Sachs·2025-07-11 01:14Investment Rating - The report maintains a "Buy" rating for Foxconn Industrial Internet (FII) with a revised target price of Rmb31.11, reflecting an upside potential of 17.9% from the current price of Rmb26.38 [16][17]. Core Insights - FII's 2Q25 net income guidance is between Rmb6.7 billion and Rmb6.9 billion, with a midpoint of Rmb6.8 billion, representing a 31% quarter-over-quarter increase and a 50% year-over-year increase [1]. - The company is experiencing significant growth in cloud computing revenues, projected to exceed 50% year-over-year, and AI server revenues are expected to grow over 60% year-over-year [1]. - FII's revenues from cloud service providers (CSPs) increased by over 150% year-over-year in 2Q25, and revenues from 800G switches are projected to be three times higher than in 2024 [1]. - The report anticipates a compound annual growth rate (CAGR) of 29% for net income from 2025 to 2027, with AI server revenues expected to rise from 29% in 2024 to 68% by 2027 [1]. Financial Projections - The report revises net income estimates upward by 3%, 4%, and 6% for 2025, 2026, and 2027 respectively, due to higher revenue expectations [5]. - FII's revenue projections for 2025E, 2026E, and 2027E are Rmb850.1 billion, Rmb1,130.6 billion, and Rmb1,274.5 billion respectively, reflecting increases of 5%, 10%, and 9% from previous estimates [8]. - The gross profit (GP) for 2025E is revised to Rmb49.9 billion, with operating profit (OP) at Rmb31.4 billion and net income at Rmb27.6 billion [8]. Market Position and Competitive Analysis - FII is positioned as a leading supplier in the AI server market, particularly in rack-level AI servers, supported by a comprehensive supply chain and global production capabilities [5][9]. - The target price is based on a price-to-earnings (P/E) multiple of 16x for 2026E, reflecting a market re-rating on AI servers [10][15].