Summary of Foxconn Industrial Internet (FII) Conference Call Company Overview - **Company**: Foxconn Industrial Internet (FII) - **Ticker**: 601138.SS - **Market Cap**: Rmb1.3 trillion / $176.3 billion - **Current Price**: Rmb63.38 - **12M Price Target**: Rmb83.8, representing a 32.2% upside Key Industry Insights - **AI Servers Market**: FII is positioned as a leader in the AI servers segment, with significant market share gains attributed to its scale, global coverage, and supply chain influence during the AI technology revolution [1][2][25]. - **Revenue Growth**: FII's revenue from AI servers is expected to grow from 8% in 2022 to 68% in 2026E, indicating a strong shift towards AI-driven products [25]. Financial Performance and Projections - **Earnings Estimates**: - 2026E Net Income revised up by 8% to Rmb56.432 billion - 2027E Net Income revised up by 7% to Rmb70.725 billion - 2026E EPS projected at Rmb2.84, up from Rmb2.63 [11][12][14]. - **Revenue Forecasts**: - 2025E Revenue: Rmb945.957 million - 2026E Revenue: Rmb1,470.954 million - 2027E Revenue: Rmb1,955.424 million, with AI servers contributing 75% of total revenue [10][12][28]. - **Operating Metrics**: - Operating income margin expected to improve from 4.2% in 2024 to 4.5% in 2026E [12][14]. Market Position and Competitive Advantages - **R&D and Execution**: FII's strong R&D capabilities and early product deliveries have allowed it to penetrate leading US Cloud Service Providers (CSPs) [2][14]. - **Vertical Integration**: Partnership with TECO enhances FII's capabilities in AI data center construction, supporting client deployments of AI servers [2][14]. - **Cost Management**: Operating expenses are projected to grow at an 18% CAGR from 2025E to 2027E, leading to a reduction in the operating expense ratio from 2.9% in 2024 to 1.3% in 2027E [7][12]. Valuation and Price Target - **Target P/E Ratio**: Updated to 29.5x for 2026E, reflecting a market re-rating due to the strong fundamentals in the AI server segment [19][26]. - **Comparison with Peers**: FII's 2026E trading P/E is 24.1, compared to peers like Gigabyte (11.7) and Wistron (14.0) [22]. Risks and Concerns - **Market Concerns**: There are worries about the sustainability of FII's market share in AI servers due to client diversification preferences [2][27]. - **Operational Risks**: Potential risks include worse-than-expected demand for AI servers, slower capacity ramp-up in new factories, and lower-than-expected iPhone shipments [27]. Conclusion - **Investment Recommendation**: Maintain a Buy rating with a target price of Rmb83.8, supported by strong growth prospects in the AI server market and improved operational efficiencies [1][25][26].