CICC: Maintains Lenovo Group (00992) outperform rating, target price of 14.8 Hong Kong dollars.

CICC released a research report stating that it maintains its profit forecast for LENOVO GROUP (00992) for FY2026/27. Based on the non-HKFRS net profit, the current stock price corresponds to a P/E ratio of 9.3 times/8.0 times for the 2026/27 fiscal year. It maintains an outperform industry rating and a target price of HKD 14.8, corresponding to a P/E ratio of 14.1/12.2 times for FY2026/27, representing a 52% upside potential. Key points from CICC are as follows: 2QFY26 performance exceeded the bank's expectations LENOVO GROUP announced its 2QFY26 performance: the company's revenue was USD 20.452 billion, a year-on-year increase of 14.6%; non-HKFRS net profit was USD 512 million, a year-on-year increase of 25.2%; attributable net profit was USD 340 million, including non-cash fair value gains related to warrants of USD 148 million, and nominal interest on convertible bonds of USD 28.47 million. The overall performance exceeded expectations, mainly due to: 1) double-digit revenue growth in the three business groups and all regional markets, with the revenue share of AI-related business increasing by 13 percentage points to 30% year-on-year; 2) improved operating profit margin. AI PC drives structural demand upgrades, actively coping with upstream core component price increases In 2QFY26, the company's IDG revenue increased by 11.8% year-on-year to USD 15.107 billion, with an operating profit margin of 7.3%. According to IDC, global PC shipments in 3Q25 increased by 9.4% year-on-year, with Lenovo's growth rate outperforming the industry, with PC shipments increasing by 17.3% year-on-year. Lenovo's leading advantage continues to expand, with a market share of 25.5%. The bank believes that this is mainly due to the accelerated penetration of AI PCs and the efficiency advantages under the globalization of the supply chain layout. According to the company's official Weibo, Lenovo holds a 31.1% market share in the global Windows AI PC market, ranking first globally; AI PC products with five AI features account for 30% of shipments in the mainland Chinese notebook market. Looking ahead, with tight upstream storage supply and pressure from rising prices, the company has flexible supply chain management, long-term cooperative relationships with key component suppliers, and an adaptable pricing mechanism, demonstrating strong risk absorption capabilities. The company remains confident in achieving double-digit year-on-year growth in PC revenue in the second half of FY2026. Strong growth in AI infrastructure business, significant reduction in operating losses In 2QFY26, ISG revenue increased by 23.7% year-on-year to USD 4.087 billion, with operating profit margins increasing by 0.3 and 1.2 percentage points quarter-on-quarter and year-on-year, respectively, and operating losses significantly reduced. The cloud infrastructure business achieved record-high revenue, AI server revenue achieved high double-digit growth, and order backlog remained strong; enterprise infrastructure business continued to transform its business models for large enterprises and SME customers.