Karrie International (1050 HK, HK$1.815, HK$3.8bn) — AI Growth Drives Product Upgrades

Karrie International Hong Kong-based company manufacturing server chassis, precision metal components and data storage equipment. It has production facilities in China and Thailand.  Benefiting from rising global AI infrastructure investment, the company is expanding beyond traditional server chassis into ASIC servers, NVIDIA’s new platforms and rack-level mechanical structures. AI-related revenue surged 87% QoQ in the latest quarter, thanks to new customer qualifications and capacity expansion. We expect a rising AI product mix and improving manufacturing efficiency to gradually translate revenue growth into stronger profitability.

AI-Server Becomes the Key Growth Driver: In FY2Q27 (July–September 2026), total revenue reached HK$1.2bn (+45% YoY/+18% QoQ), with server revenue of HK$710mn (+48% YoY/+14% QoQ), driven by growing demand for ASIC server chassis, NVIDIA platform products and related mechanical components.
AI-related products accounted for 34% of server revenue, up from 20% in the previous quarter, equivalent to roughly HK$242mn (+87% QoQ). Karrie is expanding from traditional single-server chassis into specialized mechanical components for GPU, CPU and network switch modules. This broadens its product offering and increases the potential value supplied per AI system.

ASIC Business Opens Access to New Customers: During today’s investor call, Mgt revealed that Karrie has secured two new
major cloud service providers (CSPs). One has completed the qualifications process, with revenue contribution expected to begin as soon as 4Q27.  The other is currently undergoing qualification and is expected to contribute from FY28 onward. Both opportunities cover chassis and racks, with rack orders progressing faster. The Mgt noted strong rack demand among major CSPs and relatively tight industry capacity.

In addition, one of Karrie’s ASIC customers is developing the next-generation ASIC servers.  The project has entered the tooling development stage and is expected to command higher ASPs.

NVIDIA’s New Platform Enters Production Ramp-Up: NVIDIA-related revenue is currently supported by steady shipments of network switch products, while server chassis for the next-generation Rubin platform have begun delivery and are ramping up. Karrie is also involved in chassis and mechanical component projects across GPU, CPU, storage and network switch modules. Some products are ready for mass production, and customers such as Dell and Lenovo have placed a second batch of orders. NVIDIA’s new products are expected to ramp up in the 2H27. To support rack demand, Karrie has introduced a large-scale rack stamping line in Dongguan, with further automation of welding and assembly planned by year-end. Equipment installation at its new Thailand facility is expected to begin in December 2026, with the overall expansion scheduled for completion by mid-2027.

Storage Recovers While EV Components Remain Under Pressure: Storage revenue reached HK$450mn (+51% YoY/+25% QoQ) in FY2Q27, mainly driven by recovering cold storage demand. The growth is expected to remain strong in the second half, although the business is primarily manufacturing-oriented and contributes relatively low gross profit. EV components and other products generated HK$53mn (-9% YoY/+16% QoQ), recovering sequentially but remaining under pressure YoY.

Our View: We are positive on Karrie’s exposure to the structural shift in AI servers from individual units toward integrated racks.  The change is expected to drive both higher product demand and greater content value per AI system. As AI server architecture becomes more complex, major CSPs will tend to rely on experienced and reliable suppliers capable of large-scale production. Karrie’s established expertise in tooling development, DFM design and precision stamping are certainly advantages among a relatively limited pool of qualified suppliers.

Besides, a rising contribution from higher-margin AI products should improve the overall GPM, with management expecting a 2ppts improvement for the full year, to roughly 18%. Looking ahead, new orders should drive revenue growth in FY27, while additional capacity, greater automation and operating leverage from a relatively fixed overhead base are expected to further strengthen profitability in FY28. The counter is trading at 8x FY27E P/E and an est. 3.7% dividend yield. (Research Department)