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Yangtze Business Daily News● Changjiang Business Daily reporter Zhang Lu

Thanks to the AI ​​concept, Foxconn Industrial Internet (601138.SH), whose performance has grown rapidly, decided to repurchase shares to boost confidence.

On July 30, Foxconn Industrial Internet announced that it plans to repurchase shares through centralized bidding, with the repurchase amount not less than 200 million yuan and not more than 300 million yuan, and the repurchase price not exceeding 40.33 yuan per share. The repurchased shares will be used for cancellation to reduce the company's registered capital.

As a provider of overall solutions for intelligent manufacturing and industrial Internet, Foxconn Industrial Internet has gradually deployed cloud computing equipment, AI, energy storage, etc. in recent years to develop a second growth curve.

The Yangtze Business Daily reporter noted that benefiting from the strong growth of AI business, in the first quarter of 2024, Foxconn Industrial Internet's revenue and net profit both hit new highs since its listing. The company achieved revenue of 118.7 billion yuan in the first quarter, a year-on-year increase of 12.09%, and net profit of 4.185 billion yuan, a year-on-year increase of 33.77%. Among them, AI server revenue increased nearly two times year-on-year.

Zheng Hongmeng, chairman of Foxconn Industrial Internet, said that the AI ​​industry is booming. The company expects AI to contribute 40% of its total cloud computing revenue in 2024, and AI servers to account for 40% of the global market share.

Planned repurchase of up to 300 million to boost market confidence

Recently, Foxconn Industrial Internet announced that it plans to repurchase shares through centralized bidding, with the repurchase amount not less than 200 million yuan and not more than 300 million yuan, and the repurchase price not exceeding 40.33 yuan per share. The repurchased shares will be used for cancellation to reduce the company's registered capital.

The announcement shows that as of March 31, 2024 (unaudited), Foxconn Industrial Internet’s total assets were approximately RMB 276.713 billion, net assets attributable to shareholders of listed companies were RMB 145.44 billion, and cash and cash equivalents were RMB 79.894 billion.

If the total repurchase amount is calculated based on the upper limit of RMB 300 million, the repurchase funds account for approximately 0.11% of the company's total assets, 0.21% of the net assets attributable to shareholders of the listed company, and 0.38% of monetary funds. The company has sufficient self-owned funds to pay for this share repurchase.

Regarding this repurchase plan, Foxconn Industrial Internet said that it was based on its confidence in the company's future development prospects and recognition of the company's long-term value. In order to safeguard the interests of the majority of shareholders and enhance investor confidence, it will be implemented in accordance with relevant regulations while taking into account the company's financial situation and future profitability.

It is reported that "cancellation-style repurchase" refers to a company buying back shares and canceling them by reducing its share capital, thereby reducing the company's total share capital. In the view of industry insiders, cancellation-style repurchase can increase earnings per share and shareholders' equity, making the company's stock price more "valuable", which is of great significance to boosting the company's stock price and investor confidence.

In fact, since its listing in 2018, Foxconn Industrial Internet has been taking multiple measures, using a combination of "large-scale dividends + repurchase and cancellation". The company's total annual dividend in 2023 is about 11.521 billion yuan, and the dividend rate is 54.76%, a new high since the company went public.

A reporter from the Yangtze Business Daily noticed that since its listing, Foxconn Industrial Internet has distributed dividends every year. From 2018 to 2022, the company's dividend amounts were 2.56 billion yuan, 3.974 billion yuan, 4.967 billion yuan, 9.891 billion yuan, and 10.925 billion yuan, respectively. Together with the 11.521 billion yuan in 2023, the company's cumulative dividends in 6 years have reached 43.838 billion yuan.

AI server market share is expected to reach 40%

According to public information, Foxconn Industrial Internet was established in 2015 and listed on the A-share market in 2018. The company's main businesses include cloud computing, communication mobile network equipment, high-end precision structural parts, industrial Internet and other fields. Its main products include 5G smartphones and wearable devices, high-performance AI servers, industrial robots, etc.

It is worth mentioning that Foxconn Industrial Internet is one of the earliest manufacturers to enter the AI ​​server business. In 2017, Foxconn Industrial Internet, NVIDIA and Microsoft jointly launched the world's first AI server HGX1. Since 2023, it has begun mass production of NVIDIA's H100 and H800 and other high-performance AI servers, and its customers include NVIDIA, Microsoft, Google, Amazon and other global Internet giants.

In terms of performance, benefiting from the strong growth in demand for AI computing power, which has driven the company's profitability, Industrial Internet of Things achieved revenue of 476.3 billion yuan in 2023, the second highest in history; non-net profit was 20.21 billion yuan, a year-on-year increase of 9.77%, setting a historical high.

The Yangtze Business Daily reporter noted that in 2023, as ChatGPT continued to be popular, AI applications emerged like mushrooms after rain. Major cloud service providers continued to increase their investment in AI, promoting the continuous upgrading and expansion of data center infrastructure, which directly injected momentum into the cloud computing business of Foxconn Industrial Internet, an upstream supply chain company.

The financial report shows that the revenue of Foxconn Industrial Internet's cloud computing sector will reach 194.308 billion yuan in 2023, a year-on-year decline of 8.54%, accounting for more than 40% of the total revenue. Among them, the cloud service provider business continues to improve, and the proportion of cloud computing revenue has rapidly increased to nearly 50%; the AI ​​server business, which has attracted much attention in the industry, accounts for about 30% of cloud computing revenue. Although the revenue of the cloud computing sector has declined, the gross profit margin of the sector has increased by 1.12 percentage points from the previous year to 5.08%.

In the first quarter of 2024, Foxconn Industrial Internet achieved revenue of 118.7 billion yuan, a year-on-year increase of 12.09%; net profit of 4.185 billion yuan, a year-on-year increase of 33.77%; the company's comprehensive gross profit margin was 7.64%. Its gross profit margin, revenue and net profit all set new records for the same period since the company went public.

As for the reasons for the performance growth, the financial report explained that it was mainly due to the rapid growth of the company's AI servers and the optimization of product structure. During the reporting period, the revenue of Industrial Foxconn's cloud computing business accounted for nearly 50% of the total revenue; AI server revenue increased nearly two times year-on-year, and showed a nearly double-digit growth rate month-on-month, accounting for nearly 40% of its server business revenue.

Foxconn Industrial Internet revealed that the market size of AI servers will continue to maintain a high growth trend. The company's chairman Zheng Hongmeng stated at the performance briefing that in 2024, AI contribution is expected to account for 40% of the company's total cloud computing revenue, and the company's AI servers will reach 40% of the global market share.

In the secondary market, as a core target of AI concept stocks, the overall increase in the stock price of Industrial Foxconn has been very impressive this year. As of the close of July 31, 2024, the total market value of Industrial Foxconn reached 473.7 billion yuan, and the stock price rose by 57.67% this year.