Minsheng Securities·2024-11-19 01:55Investment Rating - The report maintains a "Buy" rating for Lenovo Group, indicating a positive outlook for the company's future performance [1]. Core Insights - Lenovo Group's FY2Q25 revenue reached $17.85 billion, a year-over-year increase of 23.87% and a quarter-over-quarter increase of 15.56%. Net profit was $359 million, up 43.85% year-over-year and 47.74% quarter-over-quarter [1]. - The company is experiencing accelerated growth, with a strategic transformation yielding results. The sales gross margin was 15.66%, down 1.84 percentage points year-over-year but up 0.91 percentage points quarter-over-quarter. The net profit margin was 2.01%, up 0.28 percentage points year-over-year and 0.37 percentage points quarter-over-quarter [1]. - Lenovo's investment in artificial intelligence (AI) and research and development (R&D) is significant, with R&D expenses reaching $548 million, a 10% increase year-over-year [1]. - Non-PC business accounted for 46% of total revenue, a 5 percentage point increase year-over-year, demonstrating the effectiveness of the strategic transformation [1]. Summary by Sections IDG (Intelligent Devices Group) - Revenue for FY2Q25 was $13.5 billion, a year-over-year increase of 17% and a quarter-over-quarter increase of 18.42%, with an operating profit margin of 7.3% [1]. - Lenovo's PC business saw a 12% year-over-year revenue growth, with a market share of 23.8%, expanding its lead over the second-place competitor by 4 percentage points. AI PCs have reached double-digit shipment growth in China [1]. - The smartphone business achieved a remarkable 43% year-over-year revenue growth, reaching the highest quarterly sales and market share in a decade, ranking 7th globally with a 26% year-over-year shipment growth [1]. ISG (Infrastructure Solutions Group) - ISG revenue reached $3.3 billion in FY2Q25, a year-over-year increase of 65% and a quarter-over-quarter increase of 3.13%, marking a record high for quarterly revenue [1]. - The group is moving towards breakeven, with a 33% reduction in operating losses year-over-year. Strong AI server reserves and order volumes are expected to convert into revenue in the second half of the year [1]. - Comprehensive revenue from storage, software, and services exceeded $1 billion for two consecutive quarters, growing 35% year-over-year [1]. SSG (Solutions and Services Group) - FY2Q25 revenue was $2.2 billion, a year-over-year increase of 13% and a quarter-over-quarter increase of 15.79%, maintaining double-digit growth for fourteen consecutive quarters with an operating profit margin of 20% [1]. - The segment's revenue from operations and project solutions accounted for nearly 60%, with a 3 percentage point year-over-year growth [1]. - The global IT services market is expected to grow at over 10% annually for the next three years, with AI services projected to grow at more than double the overall market rate [1]. Investment Recommendations - The report forecasts net profits for FY25, FY26, and FY27 to be $1.25 billion, $1.47 billion, and $1.70 billion, respectively, corresponding to current price-to-earnings ratios of 11, 10, and 8 times [1]. - The company is expected to strengthen its leadership in AI PCs and achieve breakthroughs in AI server technology due to its technical reserves, maintaining a "Buy" rating [1].