Guohai Securities·2024-08-19 02:41Investment Rating - The investment rating for Lenovo Group is "Buy" (maintained) [1][9] Core Views - Lenovo Group's Q1 FY2024/25 performance shows significant year-on-year improvement, with revenue reaching $15.447 billion (YoY +20%, QoQ +12%), gross profit at $2.560 billion (YoY +14%, QoQ +5%), and net profit attributable to shareholders at $243 million (YoY +37%, QoQ -2%) [2][3] - The strategic partnership with Saudi Arabia's Public Investment Fund (PIF) through Alat aims to expand Lenovo's market presence in the Middle East, targeting a revenue increase from $1.25 billion to 10% of total revenue [2][3] - The company is expected to benefit from the issuance of $2 billion in interest-free convertible bonds, which will save $100 million in interest expenses annually over the next three years [2][3] Financial Performance Summary - For Q1 FY2024/25, Lenovo's IDG (Intelligent Devices Group) revenue was $11.422 billion (YoY +11%, QoQ +9%), accounting for 69% of total revenue, with an operating margin of 7.3% [4][6] - The ISG (Infrastructure Solutions Group) reported revenue of $3.160 billion (YoY +65%, QoQ +25%), with a negative operating margin of -1.2% due to increased investment in new projects [5][6] - The SSG (Solutions and Services Group) generated $1.885 billion in revenue (YoY +10%, QoQ +4%), maintaining a 21.0% operating margin, contributing significantly to overall profitability [6] Earnings Forecast and Valuation - Revenue projections for FY2025 and FY2026 are $62.732 billion and $71.126 billion, respectively, with net profits of $1.236 billion and $1.872 billion, leading to EPS estimates of $0.10 and $0.15 [5][8] - The P/E ratios for FY2025 and FY2026 are projected at 12.46X and 8.23X, indicating a favorable valuation outlook [5][8]