Summary of Conference Call Records Company: Inspur (000977.SZ) Key Points 1. **Upgrade to Buy**: Inspur has been upgraded from Neutral to Buy due to improving GPU supply in the China market, new GPU platforms expected in 2H25, and the growth of local chipset platforms to meet generative AI demand in China. The 12-month price target (TP) has been raised to Rmb77.8 from Rmb55, indicating a potential upside of 39.5% [1][9][10]. 2. **Revenue and Earnings Growth**: Revenue projections for Inspur have been revised upwards by 8% for 2025, 25% for 2026, and 27% for 2027, primarily driven by higher AI training server revenues. The company expects a significant ramp-up in shipments of AI training servers due to better GPU supply and new product cycles [14][18]. 3. **Market Position**: Inspur is positioned as a leading AI server ODM in China, supplying major Chinese cloud service providers (CSPs) and expanding its offerings from global-tier GPU-powered servers to local chipset-powered servers. This transition is expected to enhance its market share and profitability [10][13][14]. 4. **Earnings Revision**: Earnings have been revised upwards by 7% for 2025, 11% for 2026, and 9% for 2027, despite a lower gross margin (GM) and higher operating expenses (Opex) ratio. The expected GM is projected to decline slightly due to the higher contribution from AI training servers, which typically have lower margins [14][18]. 5. **Sensitivity Analysis**: A sensitivity analysis indicates that a 10% increase in AI training server shipments could lead to a 6% increase in total revenues and a 2% increase in gross profit. Conversely, a decrease in shipments would have the opposite effect [17]. 6. **Investment Thesis**: The investment thesis for Inspur is based on the anticipated increase in capital expenditure (Capex) from Chinese CSPs, telecom operators, and government clients focused on AI training and inferencing. The emergence of advanced AI applications is also expected to drive growth [29][32]. 7. **Risks**: Key risks include slower-than-expected ramp-up of AI servers in China, potential GPU supply constraints, and intensified pricing competition among ODM suppliers, which could negatively impact earnings [27][28][32]. Company: Piotech (688072.SS) Key Points 1. **Downgrade to Neutral**: Piotech has been downgraded from Buy to Neutral due to pressures on near-term profitability stemming from new product ramp-up. The revised TP is set at Rmb185, reflecting a 17% upside potential [2][33]. 2. **Profitability Concerns**: The company's gross margin fell to 20% in Q1 2025 from 47% in Q1 2024, attributed to higher delivery and service costs associated with new products. The expectation is that it will take time for margins to recover to the historical average of around 40% for deposition tools [35][37]. 3. **Earnings Revision**: Earnings estimates have been reduced by 3% to 5% for 2025-2027, primarily due to lower margins and adjustments in government subsidies. The target P/E multiple has been reset from 42.5x to 37.7x to reflect these changes [34][38]. 4. **Market Position**: Piotech is recognized as a local leader in deposition tools, expanding into high-end products. However, the company faces challenges due to its exposure to competitive mature nodes and the costs associated with new product delivery [34][39]. 5. **Government Subsidies**: Expected government subsidies have been lowered, reflecting the company's shift towards self-funding for new production facilities. Despite this, there is an ongoing effort to deepen cooperation with government entities [37][39]. Conclusion Inspur is positioned for significant growth in the AI server market, supported by favorable supply conditions and increasing demand. Conversely, Piotech faces challenges that have led to a downgrade, highlighting the importance of managing new product costs and maintaining profitability in a competitive landscape.