FII(SH:601138)2025-12-01 00:49Summary of Foxconn Industrial Internet (FII) Conference Call Company Overview - Company: Foxconn Industrial Internet (Ticker: 601138.SS) - Industry: Technology, specifically focusing on AI servers and ASIC (Application-Specific Integrated Circuit) technology Key Points and Arguments 1. Market Position and Growth: - FII is expected to maintain a leading market position due to its comprehensive AI server offerings and global production sites, benefiting from the rising trend in ASIC AI servers [1] - Estimated that FII's ASIC AI servers will contribute to 30% of AI server shipments by 2026 [1] 2. Revenue Projections: - Anticipated that AI server revenues will exceed 50% of total revenues in 2025 and reach up to 81% by 2028 [1] - Net income is projected to grow at a 37% CAGR from 2025 to 2028, compared to a mere 5% CAGR from 2021 to 2024 [1] 3. Gross Margin (GM) Expectations: - The diversification trend in AI server chipset platforms is expected to support FII's gross margins due to higher customization levels [1] - Improvement in production efficiency and scale ramp-up in rack-level AI servers will also contribute positively to gross margins [1] 4. Earnings Revision: - New estimates for 2028E introduced, including AMD's rack-level AI servers starting in 2H26, with expected shipments of 3k, 7k, and 7k racks from 2026 to 2028 [2] - FII is projected to be a major supplier for AMD's rack-level AI servers due to its strong R&D capabilities and global production sites [2] 5. Financial Metrics: - Revenue estimates for 2025E revised to Rmb 948.84 billion, 2026E to Rmb 1,583.59 billion, and 2027E to Rmb 2,235.27 billion [6] - Net income estimates for 2025E revised to Rmb 60.94 billion, 2026E to Rmb 76.98 billion, and 2027E to Rmb 86.70 billion [6] 6. Valuation and Price Target: - Target price set at Rmb 92.9 based on a P/E multiple of 30.3x for 2026E, reflecting a slight decrease from the previous target of Rmb 95.5 [8] - The target P/E is considered reasonable given the company's diversification into data centers and the smartphone market's evolving demands [6][8] Risks and Considerations 1. Demand Risks: - Potential for worse-than-expected demand and profit from the AI server business [9] 2. Competition Risks: - Strong competition could hinder the expansion of FII's iPhone component business [9] 3. Capacity Risks: - Slower-than-expected capacity ramp-up in new factories could impact growth [9] 4. Shipment Risks: - Lower-than-expected iPhone shipments could affect FII's revenues, as it provides components for iPhones [9] Additional Insights - FII's growth strategy includes a focus on R&D to capture the diversifying AI server trend, which is crucial for long-term growth [2] - The company is positioned to benefit from the shift in demand from traditional smartphone markets to data center solutions, indicating a strategic pivot in its business model [6] This summary encapsulates the essential insights from the conference call regarding Foxconn Industrial Internet's market position, financial projections, risks, and strategic direction.