FII(SH:601138)2025-09-07 16:19Summary of Foxconn Industrial Internet (FII) Conference Call Company Overview - Company: Foxconn Industrial Internet (FII) - Ticker: 601138.SS - Market Cap: Rmb1.1 trillion / $155.3 billion - Current Price: Rmb55.83 - Target Price: Rmb68.3, indicating a 22% upside potential [15][14] Key Industry Insights - Industry Focus: AI Servers - Growth Drivers: Strong demand for AI servers, particularly rack-level AI servers, is driving revenue growth for FII. The company is positioned to gain market share due to its advanced R&D capabilities and early delivery of next-generation products [1][4]. Financial Performance - Revenue Growth: FII's revenues are expected to increase significantly, with projections of Rmb945.96 million in 2025, Rmb1.41 billion in 2026, and Rmb1.74 billion in 2027, reflecting growth rates of 2%, 7%, and 16% respectively [9][10]. - AI Server Contribution: The contribution of AI servers to overall revenue is projected to rise to 50% in 2025, 70% in 2026, and 75% in 2027 [1]. - Gross Margin (GM): The blended GM is expected to decrease due to the lower margins associated with AI servers, but improvements in production efficiency and yield rates are anticipated to enhance GM over time [4][9]. Earnings Revision - Revised Estimates: Revenue estimates for 2025-2027 have been raised by 2%, 7%, and 16% respectively, primarily due to higher shipment and average selling price (ASP) assumptions for AI servers [4][9]. - Operating Income (OP): Adjustments to OP income reflect a decrease of -5% in 2025, -2% in 2026, and an increase of +3% in 2027 [9]. - Net Income: Expected net income revisions show a decrease of -10% in 2025, -7% in 2026, and -1% in 2027, influenced by rising finance costs and a higher tax rate [8][9]. Competitive Positioning - Market Position: FII is expected to be the earliest supplier of next-generation rack-level AI servers, which positions the company favorably against competitors [4][10]. - Peer Comparison: FII's projected trading P/E for 2026E is 22.0, compared to peers like Hon Hai at 12.5 and Gigabyte at 10.0, indicating a premium valuation due to expected growth [12]. Risks and Considerations - Downside Risks: Key risks include worse-than-expected demand for AI servers, challenges in expanding the iPhone component business, slower capacity ramp-up in new factories, and lower-than-expected iPhone shipments [14]. Conclusion - Investment Recommendation: The company maintains a "Buy" rating based on its strong growth prospects in the AI server market, robust R&D capabilities, and favorable market positioning. The target price reflects a significant upside potential, making it an attractive investment opportunity [1][15].