---
endpoint: analytics
pattern: Technology
status: done
latency_ms: 189876
conversation_id: 6cb57761-a7d3-4278-8efc-d05abe6b442a
citations: 1
created: 2026-05-31 19:49:10Z
---

# How does FII’s valuation compare to peers, and what justifies its premium/discount?

# FII (Foxconn Industrial Internet, 601138 CH) — Valuation vs Peers

## 1. Where FII Trades Today (CLSA-anchored framework)

Based on CLSA's most recent FII note (Tony Zhang, CFA, 2 May 2025, "On track delivery"):

| Metric | Value | Notes |
|---|---|---|
| 12M Target Price | Rmb20.30 (cut from Rmb23.20, **‑12.5%**) | Outperform maintained [2] |
| Applied PE multiple | **14x 26CL EPS** (cut from 16x) | 26CL EPS unchanged at Rmb1.45 [2] |
| Spot trailing PE (Feb-25) | **~12.8x** | vs 5-yr average ~14.8x, ±1 std 8.8–16.1x [4] |
| Historical average PE | **~13x** (Jun-18 to Feb-25) | Long-run anchor [1][4] |
| 2024A net profit | Rmb23.2bn (+10% YoY) | [2] |
| 2026CL EPS | Rmb1.45 | Unchanged in latest revision [2] |

The applied 14x is therefore **a slight premium to FII's own 7-year historical average (~13x)**, but FII's spot multiple (~12.8x in Feb-25) is actually **trading marginally below** its own long-term mean — i.e., the stock is not stretched on its own history [4].

## 2. Premium / Discount vs Peers — What CLSA Explicitly Says

CLSA has used identical wording across three consecutive FII notes for the peer benchmark: **FII's applied multiple is BELOW its A-share AI peer group**, and the premium is only against its own history.

| Report | Applied PE | Stance vs Peers | Stance vs Own History |
|---|---|---|---|
| Aug 2024 ("Mixed bag") | 18x 25CL | "below those of other A-share listed AI suppliers as we adopt a prudent stance" [8] | Above historical 13x [8] |
| Oct 2024 ("Decent delivery") | 20x avg 25/26CL | "below those of other A-share listed AI suppliers as we adopt a prudent stance" [7] | Above historical 13x [7] |
| May 2025 ("On track delivery") | 14x 26CL | (peer language dropped — focus shifted to tariff/26CL capex risk) | Slightly above 13x historical [1] |

**Net read**: FII trades at a structural **discount to A-share AI plays** (Cambricon-class, SMIC-class, server/ODM A-share peers carry materially higher PE multiples) but at a **modest premium to its own historical mean** — and that premium has compressed sharply since Oct 2024 (20x → 14x).

## 3. What Justifies the Discount-to-Peers

1. **ODM business mix = structurally thin margins.** GPM compressed from 9.0% (2023A) to 7.7% (2024A), and is forecast to drift to 6.2% / 5.8% / 5.6% across 25CL-27CL. EBIT margin: 4.5% (2024A) → 3.6% (26CL). Net margin: 3.8% → 3.3% [5]. AI-server revenue jumped 162% YoY in 2024 to Rmb153bn (25% of total), but its high ASP / low GM% diluted blended margins — CLSA explicitly attributes margin contraction to AI-server mix [2][5].
2. **Capital-intensity profile is industrial, not chip-design.** PB at just 2.3x (2024A), falling to 2.0x (26CL) [6]; EV/EBITDA only 10.7x (2024A), declining to 8.8x (26CL) [6]. A-share fabless AI peers (Cambricon, Hygon) trade at multi-X higher EV/EBITDA and PB.
3. **Tariff overhang.** CLSA cut the multiple from 16x → 14x in May 2025 specifically on "tariff uncertainties" and "concern on AI Capex growth in 26CL" — explicit reasons for the de-rating [2].
4. **Cyclicality risk in core legacy lines.** ~16% of revenue still ties to iPhone metal casing and 5G handset shells, exposed to smartphone cycle and Apple unit volumes [3].

## 4. What Justifies the Premium-to-Own-History

1. **AI-server franchise position.** FII is a **leader in AI-server ODM and HPC GPU boards**, supplying **40%+ share of Amazon's AI servers**, plus Microsoft and Oracle, and holds **>80% share in Nvidia GPU cards** and the HGX/UBB GPU module [3]. Management confirmed on the 1Q25 call that it is the lead manufacturing partner for GB200/GB300 next-gen rack server platforms [10].
2. **Earnings acceleration vs flat history.** Net profit growth was 0–5% in 2022–2023, accelerating to **+10% in 2024, +12% in 25CL, +11% in 26CL** [5]. ROE held above 15% throughout and is forecast to expand to 16.6% in 26CL [5]. CLSA's exact rationale: "Considering FII's fast growing AI exposure, and accelerating profit growth from 2024, we value FII at 14x 26CL PE. The applied multiple is slightly higher than the company's historical average PE of 13x" [1].
3. **Capital returns intact.** Dividend payout sustained at ~54.7% across 25CL-27CL; net cash position widens to Rmb35.6bn (25CL) [6].
4. **Networking/switch tailwind.** 400G / 800G switch ramp on top of the ODM AI-server revenue — second growth leg [3].

## 5. PE De-rating Trajectory — Why the Multiple Has Compressed

CLSA has cut FII's target PE four times in the last 12 months despite raising the long-term AI thesis:

| Date | Old PE | New PE | Driver |
|---|---|---|---|
| Aug 2024 | 22x | 18x | Margin dilution from AI-server mix [9] |
| Oct 2024 | 18x | 20x | Re-rated up on GB200 visibility (TP raised to Rmb28.80) |
| May 2025 | 16x | 14x | Tariff uncertainty + 26CL AI-capex growth concerns [2] |

So even on CLSA's bullish framework, the multiple compressed by ~36% over 9 months — a clean record of why FII screens cheap on PE but is **rightly so**: the unit economics are ODM-style, the revenue base is hostage to hyperscaler capex, and there is a structural ceiling on how much the market will pay per dollar of FII earnings vs an upstream chip designer.

## 6. Bottom Line

- **vs A-share AI peers**: **DISCOUNT** — explicitly acknowledged by CLSA as prudent given ODM margin structure and tariff risk [7][8].
- **vs FII's own history (~13x)**: **SLIGHT PREMIUM** — 14x applied multiple justified by AI-driven earnings acceleration; spot ~12.8x suggests the market is currently pricing FII *below* even its own historical average [1][4].
- **Premium drivers**: AI-server leadership (40%+ Amazon, >80% Nvidia GPU card share), accelerating EPS, durable dividend payout, GB200/GB300 lead-vendor status [3][10].
- **Discount drivers**: 6–8% GPM ODM economics, margin dilution from AI-server mix, tariff overhang, cyclical iPhone exposure [2][5].

The cleanest framing: FII is a **GARP-style AI proxy** — trading at 14x earnings on a 10%+ EPS CAGR with a 16%+ ROE — rather than a high-multiple AI growth name. The discount is structural, the premium is incremental, and CLSA's multiple-cut history shows how sensitive the rating is to (a) AI capex visibility and (b) margin mix.

---
**Sources**
[1] FII - O-PF (On track delivery), Valuation details — CLSA, Tony Zhang CFA (2 May 2025) — 607957908LinqAlpha.PDF
[2] FII - O-PF (On track delivery), Valuation changes table — CLSA (2 May 2025) — 607957908LinqAlpha.PDF
[3] FII - O-PF (On track delivery), Investment thesis — CLSA (2 May 2025) — 607957908LinqAlpha.PDF
[4] FII - O-PF (On track delivery), Historical PE vs average ±1 std table — CLSA (2 May 2025) — 607957908LinqAlpha.PDF
[5] FII - O-PF (On track delivery), Growth/margin/return ratios — CLSA (2 May 2025) — 607957908LinqAlpha.PDF
[6] FII - O-PF (On track delivery), Balance sheet ratios (PB, EV/EBITDA) — CLSA (2 May 2025) — 607957908LinqAlpha.PDF
[7] FII - O-PF (Decent delivery), Valuation details — CLSA (30 Oct 2024) — 607942680LinqAlpha.PDF
[8] FII - O-PF (Mixed bag), Valuation details — CLSA (13 Aug 2024) — 607936225LinqAlpha.PDF
[9] FII - O-PF (Mixed bag), PE multiple cut rationale — CLSA (13 Aug 2024) — 607936225LinqAlpha.PDF
[10] FII Q1 2025 Earnings Call — Foxconn Industrial Internet Co., Ltd. (Mar 2025)

Note on coverage entity: All three internal notes are CLSA-parent coverage (analyst Tony Zhang, CFA, tony.zhang@clsa.com), not CLST — appropriate for an A-share (601138 SS) name. Corpus latest FII-specific note is dated 2 May 2025; "current" multiple references above are anchored to that vintage.

## Citations

- [10] **Q1 2025 Foxconn Industrial Internet Co., Ltd.** · external

