Managing Director, Zero One, Zero One

Vincent Fernando, CFA

Managing Director, Zero One

Zero One

Founded in 2015, Zero One produces independent investment research and provides corporate finance advisory services with a focus on both listed and private technology companies. Founder Vincent Fernando has over 20 years of experience in US and Asia capital markets.

Independent Investment Research

Equity Bottom-Up

Hon Hai Precision Industry / Equity Bottom-Up

<ul>
<li>Hon Hai reported 1Q24 revenue that fell 9% YoY, however the company reiterated its guidance for significant growth in 2024E and said growth now looks stronger than guided in March.</li>
<li>Hon Hai's cloud (including servers) business didn't grow as much as guided due to material shortages; but AI server revenue up 200% YoY and significant growth is guided for 2024E.</li>
<li>The traditional server market is rebounding, to grow double digits in 2024E. Hon Hai expects to take market share in 2024. Structural Long but near-term gains could be limited.</li>
</ul>


Hon Hai reported 1Q24 revenue that fell 9% YoY, however the company reiterated its guidance for significant growth in 2024E and said growth now looks stronger than guided in March.
Hon Hai's cloud (including servers) business didn't grow as much as guided due to material shortages; but AI server revenue up 200% YoY and significant growth is guided for 2024E.
The traditional server market is rebounding, to grow double digits in 2024E. Hon Hai expects to take market share in 2024. Structural Long but near-term gains could be limited.


Hon Hai: Traditional Server Market Now Adding to AI Growth; Expects Market Share Gains in 2024E

<ul>
<li>Hon Hai's 4Q23 profit beat consensus and management has become more bullish on 2024E revenue thanks to demand for AI servers.</li>
<li>Guided 40% YoY growth expected for AI servers; Separately, Hon Hai reportedly could have won a major AI server order from HP Enterprise according to Digitimes.</li>
<li>Hon Hai shares are finally moving; We see room for continued upside based on re-rating of the company's valuation. Positive news flow potential through Nvidia's GTC conference next week.</li>
</ul>


Hon Hai's 4Q23 profit beat consensus and management has become more bullish on 2024E revenue thanks to demand for AI servers.
Guided 40% YoY growth expected for AI servers; Separately, Hon Hai reportedly could have won a major AI server order from HP Enterprise according to Digitimes.
Hon Hai shares are finally moving; We see room for continued upside based on re-rating of the company's valuation. Positive news flow potential through Nvidia's GTC conference next week.


Hon Hai: Beat & Raise; Further Valuation Upside; AI Server Product Announcements Next Week

<ul>
<li>Hon Hai shares have hit a new all-time high and have just risen past our target price of NT$155, surging after investors flocked to Hon Hai on AI news.</li>
<li>Hon Hai showcased two key technologies at Nvidia's GTC conference last week: Nvidia-based AI servers with liquid cooling systems and an AI autonomous driving controller using Nvidia's Orin X processor.</li>
<li>Hon Hai's sharp rally appears to have partly been caused by a short squeeze; While we like the long-term fundamentals and increased TP to NT$170, Hon Hai appears near-term overbought.</li>
</ul>


Hon Hai shares have hit a new all-time high and have just risen past our target price of NT$155, surging after investors flocked to Hon Hai on AI news.
Hon Hai showcased two key technologies at Nvidia's GTC conference last week: Nvidia-based AI servers with liquid cooling systems and an AI autonomous driving controller using Nvidia's Orin X processor.
Hon Hai's sharp rally appears to have partly been caused by a short squeeze; While we like the long-term fundamentals and increased TP to NT$170, Hon Hai appears near-term overbought.


Hon Hai (Foxconn): After the 50% Surge, Where Can It Go From Here?

<ul>
<li>Hon Hai beat expectations yesterday when it reported thanks to higher than expected margins. Gross margin rose to its highest level since 2018, hitting 6.7%.</li>
<li>The company has maintained its 2025E 10% gross margin target and implied that 2024 will see significant margin improvement as new higher margin businesses ramp up revenue contribution.</li>
<li>Two key market concerns: News of Chinese government investigation and political risk given Mr. Gou running for president. Company said operations continue as normal. Hon Hai remains a Structural Long.</li>
</ul>


Hon Hai beat expectations yesterday when it reported thanks to higher than expected margins. Gross margin rose to its highest level since 2018, hitting 6.7%.
The company has maintained its 2025E 10% gross margin target and implied that 2024 will see significant margin improvement as new higher margin businesses ramp up revenue contribution.
Two key market concerns: News of Chinese government investigation and political risk given Mr. Gou running for president. Company said operations continue as normal. Hon Hai remains a Structural Long.


Hon Hai's Margin Expansion Story Finally Starting to Be Realized? Results Imply Yes

<ul>
<li>Hon Hai released its December revenue figures on January 5th; Revenue came in lower than any other December in recent history.</li>
<li>Hon Hai's MIH EV consortium is showcasing solutions at CES 2024 this week in Las Vegas.  In Taiwan, the Luxgen expects 9,000 customer deliveries for its 'n7' EV by June.</li>
<li>Hon Hai is trading at less than 5x forward 2025E PE; and on a trailing basis one of the lower EV/EBITDA's in history. Latest share drop is a buying opportunity.</li>
</ul>


Hon Hai released its December revenue figures on January 5th; Revenue came in lower than any other December in recent history.
Hon Hai's MIH EV consortium is showcasing solutions at CES 2024 this week in Las Vegas.  In Taiwan, the Luxgen expects 9,000 customer deliveries for its 'n7' EV by June.
Hon Hai is trading at less than 5x forward 2025E PE; and on a trailing basis one of the lower EV/EBITDA's in history. Latest share drop is a buying opportunity.


Apple Partner Hon Hai Reports Weakest December Revenue In Years, But EV Growing; Buying Opportunity

Taiwan

Hon Hai Precision Industry Co., Ltd. provides electronic manufacturing services for computers, communications, and consumer electronic products.  The Company's business operations include desktop and notebook PC assembly, connector production, cable assembly, PCB assembly, handset manufacturing, networking equipment, and other consumer electronic devices manufacturing.

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Hon Hai Precision Industry (2317 TT)

Hon Hai: Beat & Raise; Further Valuation Upside; AI Server Product Announcements Next Week

Hon Hai's delivers strong 4Q23 profit and bullish outlook on 2024 revenue driven by demand for AI servers. Potential major order from HP...

Vincent Fernando, CFA

Hon Hai (Foxconn): After the 50% Surge, Where Can It Go From Here?

Hon Hai shares surged to new all-time high after showcasing AI technologies at Nvidia's GTC conference. We believe a short squeeze may have been...

Vincent Fernando, CFA

Hon Hai's Margin Expansion Story Finally Starting to Be Realized? Results Imply Yes

Two key market concerns: News of Chinese government investigation and political risk given Mr. Gou running for president. Key Event: Foxtron EV JV...

Vincent Fernando, CFA

Apple Partner Hon Hai Reports Weakest December Revenue In Years, But EV Growing; Buying Opportunity

Hon Hai's December revenue was the lowest in recent history, but latest developments show its EV business expansion progressing and the stock is...

Vincent Fernando, CFA

Price Gauge

52-week Range

Market Cap (USDm)

P/E

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Hon Hai: Traditional Server Market Now Adding to AI Growth; Expects Market Share Gains in 2024E

​Hon Hai anticipates significant growth in 2024E, especially in AI server market despite material shortages. Traditional server market rebounding,...

Vincent Fernando, CFA

Hon Hai: Beat & Raise; Further Valuation Upside; AI Server Product Announcements Next Week

​Hon Hai's delivers strong 4Q23 profit and bullish outlook on 2024 revenue driven by demand for AI servers. Potential major order from HP...

Vincent Fernando, CFA

Hon Hai (Foxconn): After the 50% Surge, Where Can It Go From Here?

​Hon Hai shares surged to new all-time high after showcasing AI technologies at Nvidia's GTC conference. We believe a short squeeze may have been...

Vincent Fernando, CFA

Hon Hai's Margin Expansion Story Finally Starting to Be Realized? Results Imply Yes

Two key market concerns: News of Chinese government investigation and political risk given Mr. Gou running for president. Key Event: Foxtron EV JV...

Vincent Fernando, CFA

Apple Partner Hon Hai Reports Weakest December Revenue In Years, But EV Growing; Buying Opportunity

​Hon Hai's December revenue was the lowest in recent history, but latest developments show its EV business expansion progressing and the stock is...

Vincent Fernando, CFA

Hon Hai anticipates significant growth in 2024E, especially in AI server market despite material shortages. Traditional server market rebounding,...

Hon Hai's delivers strong 4Q23 profit and bullish outlook on 2024 revenue driven by demand for AI servers. Potential major order from HP...

Hon Hai shares surged to new all-time high after showcasing AI technologies at Nvidia's GTC conference. We believe a short squeeze may have been...

Hon Hai's December revenue was the lowest in recent history, but latest developments show its EV business expansion progressing and the stock is...