Orient Securities·2024-08-20 10:09Investment Rating - The report maintains a "Buy" rating for Lenovo Group with a target price of HKD 13.13, based on a PE valuation of 16.86 times for 2024 [4][8]. Core Insights - In the first fiscal quarter, Lenovo reported revenue of USD 15.4 billion, a year-on-year increase of 20%, with net profit attributable to shareholders rising by 8% to USD 243 million. Excluding fair value changes of financial assets and impairment losses totaling nearly USD 57 million, the non-HK accounting net profit increased by 65% to USD 315 million. Operating cash flow increased by 22% to USD 791 million [3]. - The non-PC business revenue accounted for 47%, marking a historical high. The IDG segment saw a 21% increase in high-end PC revenue, with commercial PCs making up nearly 70% of sales, leading to an increase in average PC prices. The IDG operating profit margin reached 7.3%, up nearly 1 percentage point [3]. - The ISG segment achieved record revenue, with infrastructure solutions group revenue growing by 65% to USD 3.16 billion, benefiting from the launch of AI infrastructure products and increased GPU supply. Operating losses narrowed to USD 37 million, down USD 23 million year-on-year [3]. - The SSG segment maintained growth and high profitability, with revenue of USD 1.9 billion, marking 13 consecutive quarters of year-on-year growth, driven by strong demand for services and AI-driven solutions. Operating profit increased by 10% to USD 396 million, with an operating profit margin of 21% [3]. - Lenovo plans to issue USD 2 billion in zero-coupon convertible bonds to the Alat Fund, aiming to enhance its global footprint and capitalize on the growth potential in the Middle East and Africa, where the IT and business services market is projected to reach USD 38 billion by 2027 [3]. Financial Summary - For FY22A, FY23A, FY24E, FY25E, and FY26E, Lenovo's revenue is projected to be USD 61,947 million, USD 56,864 million, USD 60,903 million, USD 67,825 million, and USD 73,863 million respectively, with year-on-year growth rates of -14%, -8%, 7%, 11%, and 9% [3]. - The net profit attributable to shareholders is forecasted to be USD 1,608 million, USD 1,011 million, USD 1,241 million, USD 1,607 million, and USD 1,991 million for the same periods, with growth rates of -21%, -37%, 23%, 30%, and 24% respectively [3]. - The report indicates a projected EPS of USD 0.10, USD 0.13, and USD 0.16 for FY24E, FY25E, and FY26E respectively [4][8].