Lenovo Group Conference Call Summary Industry and Company Overview - **Company**: Lenovo Group - **Industry**: Personal Computers and Smart Devices Key Points and Arguments Financial Performance - Lenovo Group reported a strong revenue growth, with revenue doubling year-on-year to **$5.05 billion** according to Hong Kong Financial Reporting Standards [2][3] - All main business segments achieved double-digit growth, with the personal computer (PC) segment growing over **20%**, marking the fastest growth in **15 quarters** [2][3] - Operating cash flow reached **$1.2 billion**, the highest in nearly **11 quarters** [7] - Free cash flow rebounded significantly to **$750 million**, attributed to robust operating cash flow and financial cost management [7] Regional Performance - Revenue in the Chinese market grew **36%** year-on-year, with AI PC penetration nearing **30%** [5] - The Asia-Pacific region saw a **39%** revenue increase, driven by the Windows 11 update cycle and rapid expansion in the Indian market [5] - The Americas and EMEA regions grew **14%** and **9%** respectively, with Lenovo's PC market share in North America increasing from **17.5%** to **19%** [6] Business Segments - The Intelligent Devices Group (IDG) achieved **$13.5 billion** in revenue, growing **18%** year-on-year, with significant market shares in commercial and consumer sectors [11] - The Solutions and Services Group (SSG) reported a **20%** revenue growth, marking the **17th consecutive quarter** of growth, with an operating profit margin of **22%** [13][18] - Infrastructure Solutions Group (ISG) faced profitability fluctuations due to changes in product mix and increased AI R&D investments, but is expected to improve in the second half of the fiscal year [12][20] Research and Development - R&D investment increased by **10%** year-on-year, with nearly **20,000** employees in the R&D team, representing **28%** of total staff [10] - Innovations include the YOGA Solar PC concept, which boasts a solar conversion rate exceeding **24%** [10] Market Outlook - Lenovo anticipates mid-to-high single-digit growth in the PC market for the second half of the year, driven by the Windows 10 replacement cycle and AI PC launches [3][22] - The company is optimistic about future performance, viewing itself as a low-valuation, high-dividend investment opportunity [23] Strategic Responses - Lenovo adapts to tariff changes by adjusting pricing strategies, maintaining market share while ensuring profitability [16] - The company has established a globalized business model to enhance resilience against complex international political environments [17] Additional Insights - The impact of national subsidies on Lenovo's performance in China is minimal, with only **35%** of the revenue potentially influenced by such subsidies [14] - Lenovo's global PC market share growth is attributed to operational excellence and product innovation, including the introduction of unique products like rollable and solar-powered PCs [15] Conclusion - Lenovo Group's robust financial performance, strategic market positioning, and commitment to innovation position it favorably for future growth, particularly in the AI and PC segments. The company remains optimistic about its ability to navigate market challenges and capitalize on emerging opportunities.

Core Viewpoint - Lenovo Group reported strong financial performance for Q1 of the 2025/2026 fiscal year, with revenue reaching 136.2 billion yuan, a year-on-year increase of 22%, and net profit under non-HKFRS standards at 2.816 billion yuan, also up 22% [1][2][12]. Financial Performance - The company achieved a net profit growth of 112% under HKFRS, indicating robust profitability [1]. - Revenue from the three major business groups—IDG, ISG, and SSG—was 13.56 billion USD (approximately 97.3 billion yuan), 4.29 billion USD (approximately 31 billion yuan), and 2.258 billion USD (approximately 16.3 billion yuan), reflecting year-on-year growth of 17.8%, 35.8%, and 19.8% respectively [1][3]. Business Growth and Market Position - Despite a challenging global business environment due to the "tariff war," Lenovo maintained double-digit growth across all business segments, demonstrating resilience and a strong competitive position [3][6]. - The company’s PC business recorded its fastest growth in 15 quarters, driven by the launch of AI PCs, which accounted for 30% of global PC shipments [2][8]. Global Market and Supply Chain - Lenovo operates in 180 markets globally, achieving balanced growth across regions, with significant increases in the Asia-Pacific and China markets, which grew by 37% and 36% respectively [9][10]. - The company has established a robust global manufacturing footprint with over 30 manufacturing bases in more than ten countries, enhancing its supply chain resilience [10]. AI Strategy and Innovation - Lenovo's commitment to AI is evident in its "AI for All" initiative, which has accelerated AI integration across its product lines, including AI PCs and enterprise AI solutions [11][12]. - The company has positioned itself as a leader in the AI PC market, with expectations for AI PC shipments to grow by 77% year-on-year in 2025 [8][12]. Valuation and Investment Outlook - Lenovo's strong fundamentals have led to a significant increase in market capitalization, with a 24.7% rise since April, reflecting investor confidence in its long-term value [12][13]. - Analysts have raised target prices for Lenovo, with an average target of 13 HKD, indicating a potential upside of 20% from current levels [13].

Core Viewpoint - Lenovo reported strong financial performance in Q1 FY26, with revenue of $18.83 billion, a year-on-year increase of 22.0%, exceeding Bloomberg consensus expectations by 7.2% [1] - The growth was primarily driven by robust demand for hybrid artificial intelligence solutions, although gross margin declined to 14.7%, down 1.9 percentage points year-on-year due to the suspension of H20 shipments in the domestic infrastructure business [1] Group 1: IDG (Intelligent Device Group) - IDG revenue grew by 18.0% year-on-year, with operating profit increasing by 15.0% year-on-year in Q1 FY26 [2] - The global PC market share reached a record high of 24.6%, with AI PC penetration exceeding 30% [2] - The PC business revenue rose by 20.0% year-on-year, maintaining a leading position in the Windows AI PC sector [2] Group 2: ISG (Infrastructure Solutions Group) - ISG revenue increased by 36.0% year-on-year, driven by capital expenditures from global CSP customers in AI and traditional servers [3] - Despite the revenue growth, ISG recorded an operating loss of $85.52 million due to the suspension of H20 shipments and increased R&D investments in AI products [3] - Future improvements in revenue and profitability are expected with the launch of new products and the resumption of H20 sales [3] Group 3: SSG (Solutions and Services Group) - SSG revenue grew by 20.0% year-on-year, with an operating profit margin increase of 1.2 percentage points [4] - The business achieved its 17th consecutive quarter of revenue growth, with strong performance in support services and AI solutions [4] - AI solutions are showing strong momentum, particularly in manufacturing and supply chain sectors, with expectations for double-digit revenue growth in FY26 [4] Price Target and Rating - The target price has been raised to HKD 16.0, reflecting a 4.4% increase from the previous target of HKD 15.3, corresponding to approximately 15 times FY2026E PE [1][4] - The company maintains a "Buy" rating based on the acceleration of AI product deployment and growth in global PC market share [4]

Core Viewpoint - The gradual weakening of tariff impacts is expected, with AI PC penetration accelerating in the second half of the year, benefiting Lenovo's three main business segments, despite uncertainties from ISG losses [1][2] Group 1: Financial Performance - For FY2026 Q1, Lenovo reported revenue of $18.83 billion, a year-on-year increase of 21.9%, and a non-GAAP net profit of $389 million, also up 21.8%, with a net profit margin of 2.1% [1] - The non-GAAP net profit forecasts for FY2026-2028 have been revised down to $1.67 billion, $1.96 billion, and $2.30 billion, respectively, reflecting a year-on-year growth of 15.9%, 17.2%, and 17.5% [1] Group 2: Business Segment Analysis - IDG segment achieved revenue of $13.46 billion, with Lenovo's PC shipment growth of 15.2% year-on-year, significantly outperforming the industry [1] - ISG segment revenue reached $4.29 billion, a 35.8% year-on-year increase, with AI server revenue more than doubling, indicating strong demand [1] - SSG segment generated $2.26 billion in revenue, up 19.8% year-on-year, with deferred revenue of $3.5 billion, enhancing business predictability [1] Group 3: Market Outlook - The acceleration of Windows 10 replacements, continued national subsidies, and reduced tariff impacts are expected to sustain PC shipment volumes and AI PC penetration [2] - With the lifting of H20 restrictions, AI server order demand is anticipated to increase, potentially leading ISG back to profitability [2] - The SSG segment, previously underappreciated, is now expected to contribute significantly to overall performance due to rising enterprise AI demand [2]

Core Insights - Lenovo Group reported Q1 FY2025/26 earnings with revenue growth of 22% year-on-year to $18.83 billion, achieving a historical high for the same period, with all three business groups showing double-digit growth [1] - Net profit reached $505 million, up 108% year-on-year, exceeding market expectations, while non-Hong Kong Financial Reporting Standards net profit was $389 million, a 22% increase [1] - The company is committed to a hybrid AI strategy, with R&D investment increasing by 10% year-on-year, focusing on enhancing capabilities in "one body, multiple ends" and "edge-cloud" solutions [1][2] Business Segment Summaries Intelligent Devices Group (IDG) - IDG revenue was $13.46 billion, a year-on-year increase of 17.8%, with a global PC market share of 24.6%, the highest in history [1] - AIPC penetration rate continues to rise, with shipments accounting for over 30% of total PC shipments, and AIPC shipments in China with "five AI characteristics" making up 27% of total notebook shipments [1] Infrastructure Solutions Group (ISG) - ISG revenue surged by 36% year-on-year, with AI infrastructure revenue doubling and liquid cooling technology revenue increasing by nearly 30% [2] - The dual-track strategy of cloud infrastructure (CSP) and enterprise infrastructure (E/SMB) is showing initial results, with revenue and operating profit margins improving in the Chinese market [2] Solutions and Services Group (SSG) - SSG revenue grew by 19.8% to 16.3 billion RMB, achieving a historical high with an operating profit margin of 22.2%, up 1.2 percentage points year-on-year [2] - Strong growth in TruScale orders, with double-digit growth in equipment-as-a-service and triple-digit growth in infrastructure-as-a-service, driven by high-end services like hybrid cloud and AI solutions [2] Strategic Initiatives - The company is firmly executing its hybrid AI strategy, transitioning from "3S to AI Twins," focusing on scalable AI-driven solutions [2] - AIPC is positioned as a personal AI entry point, enhancing supply chain resilience and cost efficiency through global manufacturing and ODM+ models to address tariffs and geopolitical uncertainties [2] Investment Outlook - For FY2025/26 and FY2026/27, adjusted net profit is projected to be $1.63 billion (up 13.0% year-on-year) and $1.89 billion (up 15.9% year-on-year) respectively [3] - The target price is set at HKD 14.4 based on an estimated P/E ratio of 14.0x for FY2025/26, indicating a potential upside of 31.7% from the recent closing price, with a "buy" rating [3]

Core Viewpoint - Lenovo Group reported strong financial performance for 1QFY26, with revenue reaching $18.83 billion, a 22% year-on-year increase, marking a record high for the first quarter [1] Financial Performance - Revenue for 1QFY26 was $18.83 billion, up 22% year-on-year, with significant growth across regions: China (+36%), Asia Pacific (+39%), Americas (+14%), and EMEA (+9%) [1] - Non-HKFRS net profit was $389 million, a 22% increase year-on-year, while net profit attributable to shareholders was $505 million, up 108% [1] - The increase in net profit was partly due to a non-cash fair value gain of $152 million related to warrants and nominal interest of $27.82 million from convertible bonds [1] Business Trends - The PC business showed strong growth, with IDG revenue increasing by 17.8% to $13.46 billion, and personal PC revenue growing by 21.9%, the fastest growth in 15 quarters [1] - Lenovo's global PC shipment growth of 15.2% outpaced the industry average of 6.5%, leading to a market share of 24.6% [1] - AI PC shipments accounted for over 30% of total PC shipments in 2Q25, with a 27% share in the Chinese market, highlighting Lenovo's leadership in the AI PC sector [1] - The "Tianxi" personal super intelligent system has seen increased user engagement, with a weekly active user ratio averaging 40% by the end of 2Q25 [1] AI Infrastructure - ISG revenue reached $4.29 billion, a 36% year-on-year increase, despite an operating loss of $86 million due to lower margins from AI server sales and increased R&D investments [2] - AI infrastructure revenue grew by 155% year-on-year, driven by strong demand for AI computing power [2] - In China, ISG revenue increased by 76%, with improved profitability and a 3 percentage point rise in operating profit margin [2] Profit Forecast and Valuation - The company has cautiously raised FY2026/27 non-HKFRS net profit estimates by 2.3% and 2.8% to $1.687 billion and $1.968 billion, respectively [2] - Current stock price corresponds to a P/E ratio of 10.3x for FY2026 and 8.8x for FY2027, with a target price of HKD 13.40, indicating a 24% upside potential [2]

Investment Rating - The report maintains a "Buy" rating for the company with a target price of HKD 14.4, representing a potential upside of 31.7% from the recent closing price of HKD 10.93 [6]. Core Insights - The company reported Q1 FY2025/26 earnings that exceeded market expectations, with revenue increasing by 22% year-over-year to USD 18.83 billion, marking a historical high for the same period. Net profit reached USD 505 million, up 108% year-over-year, indicating strong performance across all business segments [1][4]. - The company is committed to its hybrid AI strategy, with R&D investment increasing by 10% year-over-year, aiming to enhance its AI capabilities and improve profitability over time [1][3]. Summary by Sections Smart Devices Business - The Intelligent Devices Group (IDG) generated revenue of USD 13.46 billion, a year-over-year increase of 17.8%. The company's global PC market share reached a record high of 24.6%, with AI PC (AIPC) shipments accounting for over 30% of total PC shipments [2]. - The AIPC penetration rate continues to rise, with AIPC shipments in the Chinese market representing 27% of total notebook shipments. The smartphone business has achieved double-digit revenue growth for seven consecutive quarters [2]. Infrastructure Solutions Business - The Infrastructure Solutions Group (ISG) saw revenue grow by 36% year-over-year, with AI infrastructure revenue doubling and liquid cooling technology revenue increasing by nearly 30%. The dual-track strategy of cloud infrastructure (CSP) and enterprise infrastructure (E/SMB) is showing positive results [2][3]. - Despite recording an operating loss of USD 8.55 million due to investments in AI capabilities, the long-term growth potential remains significant [2]. Solutions Services Business - The Solutions Services Group (SSG) reported a revenue increase of 19.8% to RMB 16.3 billion, achieving a historical high with an operating profit margin of 22.2%, up 1.2 percentage points year-over-year. Strong growth in TruScale orders and high-end services such as hybrid cloud and AI solutions are driving future growth [3]. Strategic Progress - The company is firmly executing its hybrid AI strategy, focusing on scalable AI-driven solutions through its "one body, multiple ends" and "edge-cloud" platforms. The AIPC serves as a personal AI entry point, enhancing supply chain resilience and cost efficiency [3]. Financial and Valuation Summary - For FY2025/26 and FY2026/27, the adjusted net profit is projected to be USD 1.63 billion (up 13.0% year-over-year) and USD 1.89 billion (up 15.9% year-over-year), respectively. The estimated P/E ratio for FY2025/26 is 14.0x [4][5].

Investment Rating - The report does not provide a specific investment rating for Lenovo Group (992) [2] Core Insights - Lenovo Group demonstrated resilience in its supply chain and operational efficiency, leading to a continuous improvement in profit margins despite a slight decline in overall gross margin [3] - The company achieved a revenue growth of 22% year-on-year in the first quarter of the fiscal year 2025/26, with a non-Hong Kong Financial Reporting Standards operating profit of $630 million, up 10% year-on-year [3][4] - The report highlights strong growth across all main business segments, with significant contributions from the IDG, ISG, and SSG divisions [5][9][12] Summary by Sections Financial Performance - The first quarter of fiscal year 2025/26 saw a revenue of $18.83 billion, reflecting a 22% year-on-year increase, with a gross margin of 14.7%, down 1.9 percentage points [3][16] - Non-Hong Kong Financial Reporting Standards net profit reached $390 million, a 22% increase year-on-year, while the Hong Kong Financial Reporting Standards net profit was $510 million, up 108% [3] Business Segment Performance - IDG business revenue was $13.5 billion, growing 18% year-on-year, with a stable operating profit margin of 7.1% [5][12] - ISG business revenue increased by 36% to $4.3 billion, with AI server revenue more than doubling, although operating profit was negative due to low-margin customer revenue and increased R&D costs [9] - SSG business revenue reached $2.3 billion, a 20% year-on-year increase, maintaining a strong operating profit margin of 22% [12] Market Dynamics - The Chinese market showed a significant recovery with a 36% revenue growth, while the Americas and Asia-Pacific regions also reported strong growth rates of 14% and 39%, respectively [4] - The company gained market share in the Americas, with a PC market share of 24.6%, while the European, Middle Eastern, and African markets grew by 9% [4] Future Projections - Revenue is projected to reach $69.08 billion in fiscal year 2024/25, with a year-on-year growth of 21.5%, and expected to continue growing to $76 billion in 2025/26 [17] - The forecasted net profit for fiscal year 2025/26 is $1.7 billion, reflecting a 22.8% year-on-year increase [17]

联想集团交出的最新季度成绩单，表现再次超出市场预期。 第一财季，联想集团总营收同比增长22%至188.3亿美元，不仅超越市场预期的174亿美元，更刷新历史 同期营收峰值；净利润达5.05亿美元，净利率保持在2.68%的健康区间。 业绩超预期可能只是新一轮浪潮的序章。 联想的估值逻辑已从"硬件龙头"升级为"混合AI服务商"。在"美国M7"与"中国七巨头"双线共振的β浪潮 中，其估值折价与产业红利之间的落差，正在加速收敛。 一、全球AI龙头引领，风险偏好外溢港股 2025年全球资本市场的核心叙事，仍旧由科技巨头主导。美股"七巨头"(M7：英伟达、微软、谷歌、亚 马逊、苹果、Meta、特斯拉)持续扮演引擎角色——英伟达市值突破4.4万亿美元登顶全球之冠，占标普 500指数权重约8%；Meta年内股价涨幅达32%，市值迫近2万亿美元大关。这些企业在AI算力、云计 算、大模型等领域的密集创新，并贡献了标普500指数过半的涨幅。进一步地，资本对AI主题的追逐更 延伸至ETF市场，AIQ、BOTZ等基金规模持续扩张，折射出全球资金对科技主线的坚定配置意愿。 但值得注意的是，当M7占标普500权重达8%、贡献指数超50%涨幅 ...

Investment Rating - The investment rating for Lenovo Group (00992.HK) is "Buy" (maintained) [1] Core Views - The report highlights that Lenovo is expected to benefit from the accelerated penetration of AI PCs and strong demand for AI servers, despite short-term pressure on ISG profitability due to increased R&D investments. The non-GAAP net profit estimates for FY2026-2028 have been adjusted to $1.67 billion, $1.96 billion, and $2.30 billion respectively, reflecting year-on-year growth of 15.9%, 17.2%, and 17.5% [4][5] Financial Performance Summary - For FY2026 Q1, Lenovo reported revenue of $18.83 billion, a year-on-year increase of 21.9%, with a non-GAAP net profit of $389 million, also up 21.8%. The net profit margin remained stable at 2.1% [5] - The breakdown of revenue by business segments shows: - IDG: Revenue of $13.46 billion, with a year-on-year growth of 15.2% in PC shipments, significantly outperforming the industry [5] - ISG: Revenue of $4.29 billion, a year-on-year increase of 35.8%, with AI server revenue more than doubling [5] - SSG: Revenue of $2.26 billion, up 19.8%, with deferred revenue of $3.5 billion, indicating strong business predictability [5] Business Outlook - The report anticipates continued momentum in PC shipments and AI PC penetration, supported by the ongoing Windows 10 replacement cycle and reduced tariff impacts. The ISG segment is expected to return to profitability as demand for AI servers increases [6] - The SSG segment has gained attention due to rising enterprise AI demand, with its operating profit contribution exceeding 50% [6]