Morgan Stanley: Lenovo Group's third quarter performance exceeds market expectations, maintaining target price of HKD 9.8.

Morgan Stanley released a research report, maintaining a "market perform" rating on LENOVO GROUP (00992) with a target price of 9.8 Hong Kong dollars, believing that Lenovo is the company best able to mitigate the risk of rising memory prices. As of the end of December last year, the third quarter shipments of desktop computers for LENOVO GROUP increased by 29% year-on-year and 11% quarter-on-quarter to 4.5 million units, which was approximately 30% higher than the bank's and market's expectations. Laptop shipments were approximately 14.3 million units, roughly in line with the bank's and market's expectations. Smartphone shipments performed strongly, increasing by 9% year-on-year and 4% quarter-on-quarter to 16.8 million units, which was 9% higher than the bank's and market's expectations. Although server data has not been released, the bank's survey indicates strong overall server demand during the period, leading to an upward revision of revenue forecasts for the Infrastructure Solutions Group (ISG) to around 5 billion US dollars, representing a year-on-year and quarter-on-quarter growth of 27% and 22%, respectively, which is 8% higher than market expectations. The bank expects Lenovo's revenue for the third quarter to be around 21.8 billion US dollars, a year-on-year and quarter-on-quarter growth of 16% and 7%, respectively, which is 5% higher than market expectations; the adjusted non-Hong Kong financial reporting standards net profit is expected to be approximately 522 million US dollars, which is 11% higher than market expectations.