FII(SH:601138)2025-10-30 02:01Summary of Foxconn Industrial Internet (FII) Conference Call Company Overview - Company: Foxconn Industrial Internet (Ticker: 601138.SS) - Industry: Technology, specifically focusing on AI servers and networking solutions Key Financial Highlights - 3Q25 Net Income: Increased by 51% QoQ, reaching Rmb10.373 billion, which is 10% ahead of Goldman Sachs estimates and 7% ahead of Bloomberg consensus [1][4] - Revenue: Totaled Rmb243.172 billion in 3Q25, a 21% increase QoQ and a 43% increase YoY, although it was 10% below Bloomberg consensus [1][4] - Gross Profit (GP): Rose to Rmb17.020 billion, a 31% increase QoQ and 43% YoY, exceeding Goldman Sachs estimates by 9% [1][4] - Operating Profit (OP): Increased by 52% QoQ to Rmb12.763 billion, reflecting strong operational execution [1][4] - Margins: Gross Margin (GM) remained stable at 7.0%, while Operating Margin (OPM) improved to 5.2% [4] Revenue Breakdown - Cloud Computing (AI Servers): Revenues surged over 75% YoY in 3Q25, driven by the ramp-up of next-generation rack-level AI servers [1] - GPU AI Servers for CSPs: Revenues increased more than 90% QoQ, indicating strong demand and effective R&D [1] - Switch Revenues: Doubled YoY, benefiting from the AI infrastructure cycle and product upgrades towards 800G [1] Operational Efficiency - Opex Ratio: Improved due to disciplined cost control while scaling up revenue from AI server production [1] - Market Share: FII is expected to capture approximately 60% of the global market share in AI servers by 2027E [9] Future Outlook - Target Price (TP): Raised to Rmb95.5, reflecting a P/E multiple of 31.3x for 2026E [1][11] - Earnings Revision: 2026-27E net income estimates increased by 7% and 9% respectively, driven by higher revenues and improved margins [9] - Revenue Growth: Expected to accelerate with a CAGR of 52% from 2025-27E, compared to 8% from 2022-24A [11] Risks and Challenges - Demand Fluctuations: Potential for worse-than-expected demand in the AI server market [17] - Competition: Strong competition in the iPhone component business could hinder growth [17] - Capacity Issues: Slower-than-expected ramp-up in new factory capacities may impact production [17] - iPhone Shipments: Lower-than-expected shipments could affect revenues, as FII supplies components for iPhones [17] Conclusion - Investment Recommendation: Maintain a "Buy" rating on FII, supported by strong financial performance, robust growth in AI server revenues, and an optimistic outlook for future earnings growth [1][11]