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Foxconn intends to sprint A shares but some of the Internet label far-fetched

via:CnBeta     time:2018/2/13 7:01:06     readed:241

According to Foxconn prospectus, in 2017, the Company's gross profit of communications network equipment business was approximately 29.28 billion yuan, accounting for 82.8%. However, as the largest gross margin source for Foxconn, its gross profit margin was only 13.65% and a significant decline from 15.88% in 2016.

In addition,cloud serviceEquipment is Foxconn's second-largest source of revenue for its main business, which contributed 15.84% of its core business gross profit in 2017. However, its gross profit margin was even lower at 4.65% for the reporting period. In contrast, gross margin of Foxconn's third-largest main business gross profit source precision tool and industrial robot project reached a high level of 49.23% in 2017, but contributed a marginal share of just 1.35%.

Taken together, Foxconn's gross profit margin for 2015-2017 is approximately 10.36%, 10.55% and 10.02%, respectively. From a gross profit margin perspective, Foxconn has a large gap with Internet industry companies.

Of course, the Internet industry can not just look at the current profits, mainly to see the future development, but if it is only equipment manufacturers, it is difficult to see the future of space for development. Investors can expect Foxconn will launch more and better high-tech projects in the future, but we should not forget two points. First, Foxconn's strengths are industrial manufacturing. Second, Foxconn's debt ratio has exceeded 80%.

Therefore, this column believes that Foxconn investors should follow the conservative principle, although Foxconn has a strong profitability, but Foxconn is not without operational risk. For example, large customers such as Apple's mobile phone may not always cooperate with Foxconn. They do not rule out the possibility that large customers will choose other countries such as India and Malaysia for processing and manufacturing. After all, the labor cost in China is not cheap at present.

From an investor's point of view, if Foxconn can successfully A-share market, there is still no risk of break, you can actively participate in the purchase, but investors should not blindly chase high, Foxconn is more like an industrial blue chip, you can use Industrial blue-chip price-earnings ratio to measure its fair valuation, but if you use the Internet industry valuation considerations, it is inevitable that there will be over-estimated suspicion.

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