Dahua Jixian: Upgraded LENOVO GROUP (00992) rating to "Buy" with a target price raised to HK$20.2

Dahua Jixian released a research report stating that LENOVO GROUP (00992) had a strong performance in the fourth quarter, with revenue increasing by 27.1% year-on-year to $21.6 billion, higher than the bank's and market expectations across all three business segments. The profitability of the Infrastructure Solutions Group (ISG) significantly exceeded expectations, with operating profit margin soaring to 3.6% year-on-year. Revenue from artificial intelligence related businesses surged by 84% year-on-year, now accounting for 38% of total group revenue. The bank upgraded Lenovo's investment rating to "buy", raising the target price from HK$9.85 to HK$20.2, equivalent to a forecasted 2027 P/E ratio of 13.2 times, in line with the industry average. The bank stated that Lenovo is transforming into an artificial intelligence infrastructure enterprise, and its personal computer business is benefiting from the cycle of AI-driven personal computer upgrades. Management expects the ISG business to continue to achieve high double-digit growth throughout the entire fiscal year 2027, driven by strong demand for AI servers and growth in CPU server businesses. Dahua Jixian raised its profit forecasts for Lenovo for fiscal years 2027 and 2028 to reflect strong demand for high-end personal computers, significant improvement in ISG business, and better-than-expected realization of TruScale business.