FII(SH:601138)2025-09-19 03:15Summary of Foxconn Industrial Internet (FII) Conference Call Company Overview - Company: Foxconn Industrial Internet (FII) - Ticker: 601138.SS - Target Price: Rmb77.2 - Recommendation: Buy Key Industry Insights - AI Servers Market: FII is expected to gain market share in AI servers due to strong R&D and execution, positioning it as a leader in delivering next-generation rack-level AI servers [1][5] - Modularized AI Data Centers: Partnership with TECO is anticipated to accelerate the deployment of AI data centers, supporting FII's AI server shipments [1][5] - Networking Equipment: Increased demand for high-speed connections is expected to drive up shipments of networking equipment and enhance dollar content through product mix upgrades towards 400G/800G [1][5] - Smartphone Market: The smartphone market is entering a peak season with strong new model ramp-up expected in September [1][5] Financial Performance and Projections - Revenue Growth: FII's revenues are projected to increase significantly, with net income estimates raised by 3% for 2025, 3% for 2026, and 4% for 2027 due to higher AI infrastructure demand [1][5][8] - Operating Expenses: Operating expenses (opex) are expected to remain disciplined, leading to a lower opex ratio of 1.9% in 2025, 1.3% in 2026, and 1.2% in 2027, compared to 2.3% in 2Q25 [7][8] - Earnings Revision: The net income for 2025E is revised to Rmb33.632 billion, reflecting a 3% increase from previous estimates [8][9] Comparative Analysis - Valuation Metrics: The target P/E multiple has been raised to 29.4x from 26.9x, reflecting a positive market re-rating on AI servers supply chain and stronger fundamentals [9][15] - Peer Comparison: FII's projected 2026E trading P/E is 24.5, compared to peers like Hon Hai at 13.3 and Gigabyte at 10.2, indicating a premium valuation based on growth prospects [11] Risks and Considerations - Demand Risks: Potential risks include worse-than-expected demand and profit from the AI server business, as well as competition affecting iPhone component business expansion [15] - Capacity Ramp-Up: Slower-than-expected capacity ramp-up in new factories could impact growth [15] - iPhone Shipments: Lower-than-expected iPhone shipments could affect FII's revenue, given its role as a component supplier [15] Conclusion - FII is positioned for strong growth driven by advancements in AI servers and networking equipment, with disciplined cost management supporting profitability. The company is recommended as a Buy with a target price reflecting significant upside potential.