CICC: Maintains "outperform" rating on LENOVO GROUP (00992) with a target price of HK$12.6.

CICC issued a research report stating that it maintains a target price of 12.6 Hong Kong dollars for LENOVO GROUP (00992) and a "outperform" rating. CICC maintains its profit forecast for the group for the fiscal year 2025, taking into account the profit potential of AI servers, but expects the revenue contribution in fiscal year 2026 to increase, therefore lowering the profit forecast for fiscal year 2026 by 10.5% to 1.533 billion US dollars. In the second quarter of the fiscal year 2025 (ending on September 30), LENOVO GROUP's revenue was 17.85 billion US dollars, a year-on-year increase of 23.9%; net profit attributable to shareholders was 359 million US dollars, a year-on-year increase of 43.9%; revenue of the company's IDG/ISG/SSG three major groups all achieved double-digit year-on-year growth; due to good operations and cost optimization, the net profit margin increased by 0.2 percentage points to 1.8% on a quarter-on-quarter basis, with net profit attributable to shareholders exceeding CICC's and market expectations. CICC pointed out that Lenovo's PC business is outperforming the industry, with a double-digit penetration rate of AIPC in the China region. According to the company's announcement, AIPC products currently account for 14% of the notebook computer shipments in the China region, and the company believes that AIPC is expected to drive a stable recovery in the personal computer market and enter a new round of replacement cycles. By 2027, the penetration rate of AIPC is expected to reach close to 80%. The company's ISG revenue remains high growth. Looking ahead, CICC believes that global demand for AI servers will remain strong, and is optimistic that the company will continue to convert backlog orders in the second half of fiscal year 2025. With expenses gradually decreasing, the ISG segment is expected to steadily move towards breakeven. The company's SSG growth engine position is further strengthened.