CITIC Construction Investment: Initiates coverage on KARRIE INT'L with a "Buy" rating as AI drives both volume and price increases in the server chassis market

According to the Zhitong Finance APP, CITIC Construction Investment has released a research report stating that it has initiated coverage on KARRIE INT'L (01050) with a "Buy" rating. It expects the company's revenues for the years 2025/26, 2026/27, and 2027/28 to be HKD 3.45 billion, HKD 4.50 billion, and HKD 5.40 billion, respectively, with profits attributable to equity holders of the company expected to be HKD 250 million, HKD 470 million, and HKD 660 million, respectively. The AI sector is driving both volume and price increases in the server chassis market. The company is actively positioning itself, continuously expanding its product categories and customer base. The AI server chassis products have made good progress with traditional OEMs, NVIDIA, CSPs, and other clients, while the company is deepening its global layout, with its factory in Thailand actively expanding production to meet future demand, leading to optimistic growth expectations for its AI server business. The report states that AI is driving both volume and price increases in the server chassis market: 1) AI is bringing incremental demand for GPU and ASIC servers; 2) Due to increased requirements for reliability and heat dissipation, the unit price of chassis products is expected to rise; 3) As AI server chassis products have higher performance requirements and faster iteration speeds, their profitability is also expected to improve. The global ordinary server chassis market is estimated to be between USD 1.37 billion and USD 2.05 billion. Based on the assumption of 5 million GPUs and 5 million ASICs, the corresponding new AI server chassis market size is estimated to be between USD 750 million and USD 1 billion. The company is one of the earliest suppliers to enter the server chassis market and holds a leading position in the global server chassis production market, with clients including globally renowned brands such as HP, Lenovo, IBM, DELL, and ZTE. The company is actively expanding its AI server product portfolio, achieving good progress with traditional OEMs, NVIDIA, CSPs, and other clients. The company has been included in NVIDIA's list of qualified suppliers for server chassis and cabinet components and is committed to delivering more prototype products to NVIDIA in the coming months. In terms of cloud service platform providers (CSPs), the company expects to receive new orders in 2025. The firm indicated that the company's revenue and profit will enter an upward growth channel in 2024/25. The company's growth was under pressure in 2022/23 and 2023/24, mainly due to the macroeconomic environment, rising raw material costs, high industry inventory levels, and weak consumer/investment sentiment. The development of AI brings new industrial opportunities. The company is actively adjusting its response, seizing AI opportunities while continuously expanding its products and customer base, and deepening its global layout. In 2024/25, the company is expected to achieve revenue of HKD 3.23 billion, a year-on-year increase of 10.8%, and profits attributable to equity holders of the company of HKD 204 million, a year-on-year increase of 20.5%, marking the beginning of an upward growth trajectory