FII(SH:601138)2025-10-16 01:48Summary of Foxconn Industrial Internet (FII) Conference Call Company Overview - Company: Foxconn Industrial Internet (FII) - Ticker: 601138.SS - Market Cap: Rmb1.3 trillion / $176.3 billion - Current Price: Rmb63.38 - 12M Price Target: Rmb83.8, representing a 32.2% upside Key Industry Insights - AI Servers Market: FII is positioned as a leader in the AI servers segment, with significant market share gains attributed to its scale, global coverage, and supply chain influence during the AI technology revolution [1][2][25]. - Revenue Growth: FII's revenue from AI servers is expected to grow from 8% in 2022 to 68% in 2026E, indicating a strong shift towards AI-driven products [25]. Financial Performance and Projections - Earnings Estimates: - 2026E Net Income revised up by 8% to Rmb56.432 billion - 2027E Net Income revised up by 7% to Rmb70.725 billion - 2026E EPS projected at Rmb2.84, up from Rmb2.63 [11][12][14]. - Revenue Forecasts: - 2025E Revenue: Rmb945.957 million - 2026E Revenue: Rmb1,470.954 million - 2027E Revenue: Rmb1,955.424 million, with AI servers contributing 75% of total revenue [10][12][28]. - Operating Metrics: - Operating income margin expected to improve from 4.2% in 2024 to 4.5% in 2026E [12][14]. Market Position and Competitive Advantages - R&D and Execution: FII's strong R&D capabilities and early product deliveries have allowed it to penetrate leading US Cloud Service Providers (CSPs) [2][14]. - Vertical Integration: Partnership with TECO enhances FII's capabilities in AI data center construction, supporting client deployments of AI servers [2][14]. - Cost Management: Operating expenses are projected to grow at an 18% CAGR from 2025E to 2027E, leading to a reduction in the operating expense ratio from 2.9% in 2024 to 1.3% in 2027E [7][12]. Valuation and Price Target - Target P/E Ratio: Updated to 29.5x for 2026E, reflecting a market re-rating due to the strong fundamentals in the AI server segment [19][26]. - Comparison with Peers: FII's 2026E trading P/E is 24.1, compared to peers like Gigabyte (11.7) and Wistron (14.0) [22]. Risks and Concerns - Market Concerns: There are worries about the sustainability of FII's market share in AI servers due to client diversification preferences [2][27]. - Operational Risks: Potential risks include worse-than-expected demand for AI servers, slower capacity ramp-up in new factories, and lower-than-expected iPhone shipments [27]. Conclusion - Investment Recommendation: Maintain a Buy rating with a target price of Rmb83.8, supported by strong growth prospects in the AI server market and improved operational efficiencies [1][25][26].