Morgan Stanley: Maintains "Overweight" rating on LENOVO GROUP (00992), target price HK$46

Morgan Stanley issued a research report stating that LENOVO GROUP (00992) said at the China BEST conference that ISG revenue will continue to accelerate, while PC demand will slow in the second half of 2026, and its net profit margin target remains unchanged. The bank maintains an "Overweight" rating on LENOVO GROUP with a target price of HK$46. The bank noted that Lenovo continues to see strong demand for general-purpose servers and AI servers, with cloud customers accounting for about 70% of revenue, including neoclouds in this category, while enterprise and SMB customers account for about 30%. Assuming no change to existing forecasts, revenue for the second quarter of fiscal year 2027 ending at the end of September this year will continue to accelerate year over year, with profit margins flat quarter over quarter; if AI demand is faster than expected, revenue growth will be stronger. Demand for enterprise general-purpose servers remains strong and will continue to drive margin expansion. Lenovo may enter the GB300 market later, but it is believed that the VR200 shipment timing will be consistent with leading suppliers. Management reiterated that it believes continuous cost reduction can keep IDG operating margin flat quarter over quarter at about 7% in the second quarter of fiscal year 2027 ending at the end of September. Management maintains its short-term net profit margin target at 5%, with a longer-term target of raising it to 5% to 8%.