FII(SH:601138)2025-10-21 01:52Summary of Foxconn Industrial Internet (FII) Conference Call Company Overview - Company: Foxconn Industrial Internet (FII) - Ticker: 601138.SS - Market Cap: Rmb1.2 trillion / $172.9 billion - Investment Rating: Buy - Price Target: Rmb83.80, representing a 35.0% upside from the current price of Rmb62.06 Key Industry Insights 1. Profitability Focus: Management emphasized the importance of maintaining margins, particularly in the AI server segment. Strategies include: - Scale Expansion: FII plans to add new customers and increase allocations to existing ones to enhance production efficiency [2][2] - Margin Improvement: Targeting leading cloud service providers (CSPs) for better margins compared to brand customers [2][2] - R&D and Automation: Continued investment in robotics and AI to improve production efficiency and cash flow [2][2] - Management Efficiency: Strong local management in production sites enhances relations with local stakeholders [2][2] 2. Competitive Advantages: FII is confident in its competitive position in the AI server market, drawing parallels to previous tech cycles where customers consolidated suppliers. Key points include: - High Entry Barriers: The need for strong R&D and global production capabilities increases entry barriers, benefiting FII [3][3] - Comprehensive Offerings: FII's partnerships with major suppliers like NVIDIA and AMD enhance its market position [3][3] - Ecosystem Collaboration: Close collaboration with supply chain partners, such as TECO, accelerates customer deployment in AI [6][6] 3. Networking Equipment Expansion: FII is optimistic about its networking business, driven by the Gen-AI trend. Key developments include: - Specification Upgrades: Transitioning from 800G in 2025 to 1.6T in 2026, and up to 3.2T by 2027, significantly increasing switching capacity [7][7] - Market Share: FII holds over 75% market share in global switch sales as of 1H25 [7][7] Financial Projections - Revenue Growth: Forecasted AI revenue contribution is expected to grow from 8% in 2022 to 68% by 2026 [8][8] - Earnings Estimates: Projected EPS growth from Rmb1.17 in 2024 to Rmb3.56 in 2027 [11][11] Risks and Challenges 1. Demand Fluctuations: Potential for worse-than-expected demand in the AI server business [10][10] 2. Competitive Pressures: Strong competition in the iPhone component business could impact growth [10][10] 3. Capacity Constraints: Slower-than-expected ramp-up in new factories may hinder production [10][10] Conclusion - FII is well-positioned to capitalize on the growing demand for AI servers and networking equipment, supported by strong R&D, strategic partnerships, and a focus on profitability. The company maintains a positive outlook despite potential risks associated with market competition and demand fluctuations.