Soochow Securities·2024-02-25 16:00Investment Rating - The report maintains a "Buy" rating for Lenovo Group (00992.HK) [1] Core Views - Lenovo Group's FY2024 Q3 performance shows short-term pressure, with expectations for recovery in the PC cycle and increased penetration of AI PCs to boost performance [1][3] - The company's Q3 revenue reached $15.7 billion, a year-on-year increase of 3%, while net profit attributable to shareholders was $340 million, down 23% year-on-year, exceeding market consensus expectations [2][3] Summary by Sections IDG Business Performance - The Intelligent Devices Group (IDG) reported revenue of $12.4 billion, with operating profit of $900 million, both up 7% year-on-year [3] - Non-PC business performed well, generating $2.6 billion in revenue, accounting for over 21% of IDG, with smartphone shipments up 32% year-on-year and tablet sales also showing double-digit growth [3] - PC business outperformed the market, with shipments of 16 million units, a 3.9% year-on-year increase, compared to a global decline of 2.7%, leading to a market share increase of 1.5% to 24% [3] - AI PCs are seen as a turning point for the industry, with expected acceleration in penetration in 2025 and 2026, potentially reaching 60% by 2026 [3] ISG Business Performance - The Infrastructure Solutions Group (ISG) reported revenue of $2.5 billion, down 13% year-on-year but up 24% quarter-on-quarter, with operating loss narrowing to $40 million [3] - Recovery in orders from cloud and key enterprise customers, along with product structure optimization, contributed to a quarter-on-quarter improvement [3] - The company anticipates rapid growth in AI server products as GPU supply constraints ease [3] Earnings Forecast and Valuation - The report adjusts FY24/25 net profit forecasts from $1.16 billion/$1.45 billion to $0.96 billion/$1.22 billion, while raising FY26 net profit from $1.69 billion to $1.72 billion [3] - The latest closing price corresponds to P/E ratios of 14.6/11.5/8.2 for FY24/25/26 [3]