Huajin Securities·2024-02-29 16:00Investment Rating - The report assigns a "Buy" rating for Lenovo Group (00992.HK) with an initial coverage [2]. Core Views - Lenovo's revenue has returned to a growth trajectory, driven by AI PCs and servers, with Q3 2024 revenue reaching $15.721 billion, a year-on-year increase of 3% and a quarter-on-quarter increase of 9% [1]. - The company is expected to benefit significantly from the gradual recovery of the PC market and the rapid penetration of AI PCs and servers, leading to continuous revenue growth [2]. Financial Performance Summary - For Q3 2024, Lenovo reported a net profit of $337 million, a decrease of 23% year-on-year but an increase of 35% quarter-on-quarter [1]. - The Intelligent Devices Group (IDG) generated $12.362 billion in revenue, up 7% year-on-year, with an operating profit of $911 million, also up 7% [1]. - The Infrastructure Solutions Group (ISG) saw revenue of $2.473 billion, down 13% year-on-year, with an operating loss of $38 million, a decrease of 187% [1]. - The Solutions and Services Group (SSG) achieved revenue of $2.021 billion, a 10% increase year-on-year, with an operating profit of $412 million, up 11% [1]. Revenue Forecast - The report forecasts Lenovo's overall revenue for FY24, FY25, and FY26 to be $56.052 billion, $60.555 billion, and $67.160 billion respectively, with corresponding net profits of $945 million, $1.198 billion, and $1.633 billion [4][5]. Business Segment Analysis - IDG revenue is expected to decline by 10% in FY24, followed by growth of 6.9% in FY25 and 9.8% in FY26 [4]. - ISG revenue is projected to decrease by 12% in FY24, then grow by 12.9% in FY25 and 15.3% in FY26 [4]. - SSG revenue is anticipated to grow by 10.4% in FY24, 9.48% in FY25, and 9.3% in FY26 [4]. Market Position and Competitive Advantage - Lenovo is positioned as a leading player in the global PC market and is expected to benefit from the increasing penetration of AI PCs, which is projected to exceed 50% by 2026 [2]. - The company has become the third-largest AI server vendor globally, with AI infrastructure revenue exceeding $2 billion [2]. Valuation Metrics - The report provides a comparison of Lenovo's valuation metrics with comparable companies, indicating a P/E ratio of 14.54 for FY24, which is lower than its peers [7].