Summary of Foxconn Industrial Internet Co. Ltd. Conference Call Company Overview - **Company**: Foxconn Industrial Internet Co. Ltd. (FII) - **Stock Code**: 601138.SS - **Market Cap**: US$71,898 million - **Current Share Price**: Rmb27.50 - **Price Target**: Rmb33.00, representing a 20% upside from the current price [1][7] Key Industry Insights - **AI Growth in China**: FII is expected to benefit significantly from the growth of AI in China, particularly as Nvidia resumes GPU shipments to the country. This is anticipated to enhance the computing resources available to China's cloud service providers (CSPs) [3][27]. - **AI Server Revenue Contribution**: AI server-related revenue is projected to contribute approximately 55% of FII's total revenue in 2025, with a year-on-year increase of 23% expected in total revenue for 2026 [9][34]. Financial Performance and Projections - **Revenue Estimates**: - 2025 Revenue: Rmb923,121 million - 2026 Revenue: Rmb1,136,946 million - 2027 Revenue: Rmb1,366,404 million [7][37] - **Earnings Estimates**: - 2025 EPS: Rmb1.46 - 2026 EPS: Rmb1.80 - 2027 EPS: Rmb2.19 [7][37] - **Operating Margins**: Expected to improve due to increased revenue from AI server sales, with EBIT margins projected at 3.4% for 2026-2027 [4][36]. Strategic Developments - **Increased AI Chip Supply**: FII is positioned to gain from the increased supply of AI chips to China, with every 1 million units of H20 or RTX Pro 6000 shipments expected to add approximately 2% to FII's total revenue in 2025 [3][27]. - **Operating Leverage**: The company anticipates that higher revenue will drive operating margins above market expectations, despite lower gross margins from server rack assembly work [4][36]. Investment Thesis - **Overweight Rating**: Morgan Stanley maintains an "Overweight" rating on FII, citing the company's strong position in the AI server market and expected profit increases [5][12]. - **Valuation Methodology**: The price target increase from Rmb25.50 to Rmb33.00 reflects higher earnings estimates for 2026-2027 and a multi-stage residual income valuation model [38][39]. Risks and Considerations - **Market Competition**: Potential risks include increased competition in the manufacturing business and lower-than-expected demand for 5G and data center services [26][36]. - **Economic Outlook**: A weaker macroeconomic environment could impact FII's growth trajectory and revenue expectations [26][36]. Conclusion Foxconn Industrial Internet Co. Ltd. is well-positioned to capitalize on the growth of AI in China, with significant revenue contributions expected from AI server offerings. The company's strategic relationships with major CSPs and its operational efficiencies are likely to enhance profitability in the coming years.