Ge Long Hui·2025-05-29 03:28Core Viewpoint - Shenwan Hongyuan has initiated coverage on Lenovo Group with a "Buy" rating, indicating significant upside potential due to its status as an undervalued ICT full-stack supplier and the presence of untapped stock price catalysts [1] Group 1: Market Dynamics - The report highlights the potential for Lenovo's stock price to rise due to the success of AIPC products and increased demand for AI servers driven by CSP customer needs [1] - The PC market is expected to enter a new upcycle, supported by the peak in online office PC purchases from 2020 to 2022, the end of Windows 10 support, and the demand stimulated by innovative AIPC products [1][2] - Lenovo has established a stable business model that has allowed it to grow from a local player to a global leader in the PC market, with its revenue closely tied to the global PC market's performance [1] Group 2: Revenue Composition - Historically, PCs accounted for about 70% of Lenovo's revenue, but the rise of AI has shifted growth drivers towards mobile devices, servers, and industry-specific intelligent solutions [2] - The ISG segment, primarily focused on servers, is seeing an increasing revenue share due to global AI capital expenditure, while the SSG segment is expected to grow rapidly as enterprises undergo digital transformation [2] Group 3: AI Strategy - Lenovo is transitioning from a hardware supplier to a software service provider, leveraging AI as a key focus area, with established AI ecosystems like Qingtian 3.0 and Tianxi [2][4] - The company aims to create an "AI ecosystem" that integrates various AI applications through its hardware, positioning itself as a critical player in the AI landscape [4] Group 4: Business Segments - In the IDG segment, Lenovo is experiencing a recovery in PC sales and rapid growth in mobile devices, with a projected revenue share of 73% for FY24/25 [5] - The SSG segment is focused on IT services and solutions, with a revenue share of approximately 6% for FY24/25, benefiting from the AI digital transformation trend [5] - The ISG segment, which includes servers and storage, is expected to account for 21% of revenue in FY24/25, driven by demand from CSPs and SMBs [6] Group 5: Valuation - Lenovo's valuation is compared to global ICT suppliers, with a projected PE ratio of 9x for FY25/26, significantly lower than the average PE of 16x for comparable companies, indicating substantial upside potential [7]