Huaqin Technology (SH:603296)2025-09-08 04:11Summary of Huaqin Technology (603296.SS) Conference Call Company Overview - Company: Huaqin Technology (603296.SS) - Event: Asia Leaders Conference 2025 - Date: September 4, 2025 - Rating: Buy (on CL) Key Points 1. Data Center Business - Management is optimistic about the data center business, driven by increasing AI infrastructure demand in China - Huaqin aims to maintain its market-leading position due to its experience in AI infrastructure manufacturing and successful partnerships with major Chinese CSPs - Continued investment in R&D for AI servers, including: - Various chipset platforms - Liquid cooling solutions and vertical power supply systems - Expected revenue mix from data center business to rise from 21% in 2024 to 56% in 2028E, supported by diversified product lines and strong R&D capabilities [2][1] 2. Legacy Business (PC and Smartphone ODM) - Huaqin remains positive about its legacy business, citing: - Stable market share and increasing penetration in smartphone ODM - Entry into new global-tier consumer electronics PC supply chains, which may enhance market share - Anticipated growth in legacy business will support overall company growth, driven by: - Accumulated experience in consumer electronics ODM - Improved operational profit margins due to rising business scale - Established partnerships with global-tier consumer electronics brands [3][6] 3. Capital Expenditure (Capex) and Operating Expenditure (Opex) Outlook - Capex for 2024 is projected to increase by 41% YoY to Rmb2.1 billion - Management expects capex to continue rising in 2025 and remain elevated in subsequent years to support growth in consumer electronics, data centers, automotive electronics, and AIoT - Despite increased R&D investments, the overall opex ratio is expected to decrease in the long run as revenues scale up - Projected earnings growth at a 27% CAGR from 2025 to 2028E, driven by revenue growth across diversified product lines and disciplined cost control [7][1] 4. Valuation and Price Target - 12-month price target set at Rmb124, based on a target 2026E P/E multiple of 23.9x - Target P/E derived from correlation between P/E and EPS growth of peers - Key risks include: - Slower-than-expected ramp-up of AI server production in China - Delays in production site diversification - Increased pricing competition [8][9] 5. Financial Projections - Market cap: Rmb89.4 billion / $12.5 billion - Revenue projections: - 2024: Rmb109.9 billion - 2025E: Rmb162.0 billion - 2026E: Rmb224.4 billion - 2027E: Rmb276.3 billion - EBITDA projections: - 2024: Rmb3.3 billion - 2025E: Rmb5.1 billion - 2026E: Rmb6.5 billion - 2027E: Rmb8.4 billion - EPS projections: - 2024: Rmb2.88 - 2025E: Rmb3.99 - 2026E: Rmb5.19 - 2027E: Rmb6.56 [9][1] Additional Insights - Huaqin's disciplined cost control and operational efficiency are crucial for sustaining earnings growth - The company is well-positioned to capitalize on the growing demand for AI and consumer electronics, with a strong focus on R&D and strategic partnerships [7][1]