Investment Rating - The report maintains an "Overweight" (OW) rating on Lenovo, downgrades Asustek to "Equal Weight" (EW), and downgrades Acer, Compal, and Foxconn to "Underweight" (UW) [1][5]. Core Insights - The report expresses a cautious outlook on the PC market, lowering PC unit assumptions by 3% for 2025-26 due to increased policy uncertainties and recession concerns [2][10]. - There is an expectation of increased inventory building among OEMs for the US market, particularly in the second quarter, as notebooks are currently exempt from tariffs [3][4]. - The report suggests avoiding investments in the PC/NB segment due to the risks associated with policy uncertainties, while preferring commercial over consumer segments due to their resilience [5][12]. Summary by Sections PC/NB Market Outlook - The report indicates a 3% reduction in PC shipment assumptions for 2025-26, reflecting a more conservative stance amid macroeconomic uncertainties [2][10]. - Notebooks are expected to see a 5% quarter-over-quarter increase in builds for Q2, with total builds forecasted at 31.2 million units, which is a 5% increase from Q1 but a 4% decrease year-over-year [3][4]. Inventory and Pricing - Current notebook inventory levels are estimated to be between 7 to 15 weeks, likely closer to 10-12 weeks, with potential for further inventory increases during the tariff pause [4][5]. - Pricing adjustments are not anticipated to significantly impact consumers in the near term due to existing inventory levels [4]. Stock Recommendations - The report recommends avoiding the PC/NB segment, downgrading several stocks including Compal, Acer, Asustek, and Foxconn, while maintaining an OW on Lenovo due to its defensive positioning in the commercial PC market [5][12]. - Lenovo's stock is viewed as largely de-risked following its underperformance compared to the Hang Seng Index [5][12]. Financial Adjustments - Earnings estimates for Lenovo have been adjusted downward by 1%, 9%, and 10% for fiscal years 2025-27, respectively, reflecting a more conservative outlook [36][38]. - The price target for Lenovo has been lowered from HK$13.10 to HK$10.00, driven by decreased earnings estimates [38][40].