FII(SH:601138)2025-08-18 01:00Summary of Foxconn Industrial Internet (601138.SS) Earnings Call Company Overview - Company: Foxconn Industrial Internet (FII) - Ticker: 601138.SS - Market Cap: Rmb890.9 billion / $124.0 billion - Target Price: Rmb59.50 (up from Rmb31.11) with a 12-month upside of 32.6% [1][32] Key Industry Insights - AI Server Market: FII is positioned as a global leader in AI servers, with a comprehensive product offering including components, systems, and liquid cooling solutions. The company is expected to significantly increase its market share as new chipset platforms are introduced [1][32]. - Revenue Growth: FII's AI servers revenues are projected to grow from 51% in 2025E to 70% in 2027E, indicating a shift in market exposure from smartphones to data centers [1][32]. Financial Performance - 2Q25 Results: FII reported a net income increase of 32% QoQ, driven by higher gross margins and a 60% YoY increase in AI server revenues. The company shipped approximately 1.9k racks of AI servers in 2Q25 [19][21]. - 3Q25 Guidance: FII anticipates a triple-digit QoQ increase in rack-level AI server shipments, with revenues from AI servers expected to nearly double compared to 2Q25 [1][17]. - Revenue Projections: - 2025E Revenue: Rmb928.2 billion (up 9% from previous estimates) - 2026E Revenue: Rmb1,315.9 billion (up 16%) - 2027E Revenue: Rmb1,508.8 billion (up 18%) [15][23]. Earnings Revisions - Net Income Adjustments: Net income estimates have been raised by 32% for 2025E, 41% for 2026E, and 41% for 2027E, reflecting higher revenues and improved operational efficiency [21][22]. - EPS Growth: Expected EPS growth is projected at 56.8% in 2025E and 49.6% in 2026E [11][21]. Market Position and Competitive Landscape - Market Share: FII is expected to capture over 50% of the global market share in rack-level AI servers, benefiting from strong delivery capabilities and market penetration in leading US cloud services [17][22]. - Peer Comparison: FII's 2026E trading P/E is projected at 16.4, which is competitive compared to peers [29]. Risks and Considerations - Downside Risks: - Demand and profit from the AI server business may underperform expectations - Competition in the iPhone component business could hinder growth - Capacity ramp-up in new factories may be slower than anticipated - Lower-than-expected iPhone shipments could impact revenues [32]. Conclusion - Investment Recommendation: Maintain a Buy rating on FII, supported by strong growth prospects in the AI server market, improved financial performance, and a robust market position [1][32].