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 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>U.S. chip restrictions have hobbled Hon Hai's China EV competition.</li>
<li>AI and advanced semiconductors will become a necessity for a globally competitive EV platform and Hon Hai appears to be moving aggressively to capture this opportunity.</li>
<li>The shares should see topline growth and major margin expansion into 2025, and the market appears to have not yet priced-in Hon Hai's latest advantageous position.</li>
</ul>


U.S. chip restrictions have hobbled Hon Hai's China EV competition.
AI and advanced semiconductors will become a necessity for a globally competitive EV platform and Hon Hai appears to be moving aggressively to capture this opportunity.
The shares should see topline growth and major margin expansion into 2025, and the market appears to have not yet priced-in Hon Hai's latest advantageous position.


Hon Hai: U.S. Chip Restrictions Vs. China Have Put Hon Hai in a Stronger Than Ever Position

Fitipower Integrated Technology / Equity Bottom-Up

<ul>
<li>We had a call with Fitipower management to understand the company’s latest situation in light of its weak share price and light analyst coverage. </li>
<li>Compared to the overall semiconductor industry, Fitipower’s inventory status is exceptionally better than the industry median and thus the company will be under less pressure in the coming quarters.</li>
<li>Fitipower has a large T$12bn net cash position, equivalent to 48% of its market cap. For 2022E, we expect T$4.5-5bn in EBITDA, which is about 18-20% of its market cap.</li>
</ul>


We had a call with Fitipower management to understand the company’s latest situation in light of its weak share price and light analyst coverage. 
Compared to the overall semiconductor industry, Fitipower’s inventory status is exceptionally better than the industry median and thus the company will be under less pressure in the coming quarters.
Fitipower has a large T$12bn net cash position, equivalent to 48% of its market cap. For 2022E, we expect T$4.5-5bn in EBITDA, which is about 18-20% of its market cap.


Fitipower: Large % Market Cap as Cash Makes for Acquisition Target Price Support

<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?

Tracking developments across tech supply chains, Tech Supply Chain Tracker

Tech Supply Chain Tracker

Tracking developments across tech supply chains

<ul><li>LGD plans to invest $1B to expand OLED module production in Vietnam, signaling a commitment to growth in the technology sector.</li><li>Wolfspeed makes a bold move by firing CEO in response to slowdown in the electric vehicle industry, showing a willingness to adapt to market changes.</li><li>MiTAC introduces AIoT innovations for smarter cities and transportation, demonstrating a focus on advancing technology for the future.</li></ul>

LGD plans to invest $1B to expand OLED module production in Vietnam, signaling a commitment to growth in the technology sector.Wolfspeed makes a bold move by firing CEO in response to slowdown in the electric vehicle industry, showing a willingness to adapt to market changes.MiTAC introduces AIoT innovations for smarter cities and transportation, demonstrating a focus on advancing technology for the future.

Tech Supply Chain Tracker (20-Nov-2024): LGD invests $1B in Vietnam OLED production.

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'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

Hon Hai: U.S. Chip Restrictions Vs. China Have Put Hon Hai in a Stronger Than Ever Position

AI and advanced semiconductors will become a necessity for a globally competitive EV platform -- This means that U.S. chip restricitons for China...

Vincent Fernando, CFA

Fitipower: Large % Market Cap as Cash Makes for Acquisition Target Price Support

We had a call with Fitipower management to understand the company’s latest situation in light of its weak share price and light analyst coverage.

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

Tech Supply Chain Tracker (20-Nov-2024): LGD invests $1B in Vietnam OLED production.

Companies such as LGD, MiTAC, Micron, and Foxconn make strategic moves in AI, IoT, and chip production while Samsung and YMTC Zhitai compete in the...

Tech Supply Chain Tracker

Price Gauge

52-week Range

Market Cap (USDm)

P/E

Dividend (Yield)

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

Hon Hai: U.S. Chip Restrictions Vs. China Have Put Hon Hai in a Stronger Than Ever Position

AI and advanced semiconductors will become a necessity for a globally competitive EV platform -- This means that U.S. chip restricitons for China...

Vincent Fernando, CFA

Fitipower: Large % Market Cap as Cash Makes for Acquisition Target Price Support

We had a call with Fitipower management to understand the company’s latest situation in light of its weak share price and light analyst coverage.

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

Tech Supply Chain Tracker (20-Nov-2024): LGD invests $1B in Vietnam OLED production.

Companies such as LGD, MiTAC, Micron, and Foxconn make strategic moves in AI, IoT, and chip production while Samsung and YMTC Zhitai compete in the...

Tech Supply Chain Tracker

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...