FII(SH:601138)2025-09-06 07:23Summary of Foxconn Industrial Internet (FII) Conference Call Company Overview - Company: Foxconn Industrial Internet (FII) - Stock Code: 601138.SS - Market Cap: Rmb1.1 trillion / $147.6 billion - Industry: Greater China Technology Key Points 1. AI Servers Expansion - Management is optimistic about FII's leading market position in AI servers, supported by strong R&D and automated production capabilities - The company is expected to ramp up shipments of rack-level AI servers in the coming months, with projected revenue growth of 23% and 31% quarter-over-quarter in Q3 2025 and Q4 2025 respectively, and up to 42% year-over-year in 2026E [2][9][10] 2. Profitability Improvement - FII anticipates enhancements in margins and working capital due to: - Increased scale from rack-level AI servers leading to better economic efficiency - Improved yield rates and production efficiency, which will shorten production periods and ease working capital burdens - Rising orders for ASIC AI servers from multiple customers - A solid smartphone metal middle frame component business bolstered by strong R&D [3][7] 3. R&D Complexity - The complexity of manufacturing rack-level AI servers requires significant R&D investment, which impacts both capital expenditures and operational efficiency - FII's management has demonstrated strong execution, reflected in their accounts payable (AP) days of 61 days compared to accounts receivable (AR) days of 52 days, indicating effective inventory management [8] 4. Financial Projections - FII's operating profit margin (OPM) is expected to gradually improve from 4.4% in 2025E to 4.7% in 2027E [7] - Revenue projections for the upcoming years are as follows: - 2025: Rmb609.14 billion - 2026: Rmb928.22 billion - 2027: Rmb1,315.92 billion [10] 5. Price Target and Risks - The 12-month price target for FII is set at Rmb59.50, representing a 12% upside from the current price of Rmb53.13 - Key downside risks include: - Weaker-than-expected demand and profitability from the AI server business - Slower-than-expected capacity ramp-up in new factories - Competitive pressures affecting the iPhone component business [9][10] 6. Market Position and Strategy - FII's comprehensive offerings, including GPU modules, AI servers, and liquid cooling systems, position it well to capture market share, especially during new product cycles - The company is expected to benefit from its global production sites and strong balance sheet, enhancing its ability to capitalize on the AI server trend [2][9] Additional Insights - The management's focus on R&D and production efficiency is crucial for maintaining competitive advantages in the rapidly evolving AI server market - The company's ability to manage working capital effectively, as indicated by its CCC (Cash Conversion Cycle) days of 48 days, reflects strong operational management despite the complexities involved in AI server production [8]