Summary of UNIS (000938.SZ) Conference Call Company Overview - **Company**: UNIS (000938.SZ) - **Industry**: AI servers and networking solutions - **Market Cap**: Rmb79.8 billion / $11.2 billion - **Current Price**: Rmb27.90 - **12-Month Price Target**: Rmb31.40, indicating a potential upside of 12.5% [18] Key Financial Highlights - **2Q25 Performance**: - Net income increased by 99% QoQ to Rmb692 million, beating estimates by 19% [3] - Revenue rose by 28% QoQ to Rmb26.635 billion, a 27% YoY increase [7] - Gross margin (GM) decreased to 14.9% from 15.7% YoY, while operating margin (OPM) improved to 5.1% [7] - **Revenue Growth Drivers**: - Strong demand for computing infrastructure, particularly AI servers from Chinese cloud service providers (CSPs) [3] - Product mix upgrades and local chipset substitutions contributed to cost reductions and improved gross margins [3] Market Dynamics - **AI Server Demand**: - Management reported mid-double-digit YoY growth in server revenues for 1H25, primarily driven by AI servers for the China cloud market [2] - AI server revenue is projected to contribute 39% of total revenue by 2027, with a compound annual growth rate (CAGR) of 65% from 2025 to 2027 [2] - **Cloud Capex Expansion**: - Positive outlook on China’s cloud capital expenditure on AI infrastructure, supported by favorable AI-related policies [2][9] Earnings Revisions - **Net Income Estimates**: - Revised upward by 13% for 2025E, 12% for 2026E, and 14% for 2027E, reflecting higher revenue and gross margins [9] - **Revenue Projections**: - 2025E revenue increased from Rmb98.518 billion to Rmb103.097 billion, a 5% increase [10] - 2026E revenue revised from Rmb125.583 billion to Rmb131.620 billion, also a 5% increase [10] Valuation Metrics - **Current Valuation**: - Trading at 26.4x 2026E P/E, close to the target of 29.7x [1] - **Target Price Calculation**: - Target price of Rmb31.4 based on a target P/E multiple of 29.7x, derived from peer comparisons and expected EPS growth of 22% [10] Risks and Considerations - **Key Risks**: - Variability in the pace of China cloud capex expansion [17] - Competitive pressures from local players [17] - Uncertainty in AI server shipment ramp-up [17] Conclusion - **Rating**: Neutral - **Outlook**: Continued revenue growth anticipated from AI server demand and cloud infrastructure investments, though current valuation reflects much of this potential [1][9]