Dahua Jixian: Lenovo Group is expected to see a short-term boost in profits, but faces long-term pressure from storage chip costs. Maintaining a buy rating on the stock.

Analysts at Great Wall Securities stated in a research report that, driven by strong personal computer sales and improved profitability in the infrastructure business, they expect Lenovo Group's adjusted net profit for the second quarter of the 2026 fiscal year to grow by 7.4% year-on-year. However, these analysts also mentioned that, with intensified overseas competition, the positive impact of strong personal computer sales may be partially offset by the adverse effect of weak smartphone sales. Additionally, the growth of the infrastructure business sector may have slowed down due to supply constraints on artificial intelligence servers. Profit in the near term is expected to remain stable thanks to cost controls, but the continually rising prices of storage chips, which may persist due to supply shortages until the end of 2026, could put long-term profitability under pressure as Lenovo Group is unlikely to pass on all costs to consumers. Great Wall Securities maintains a buy rating on the stock with a target price of 12.70 Hong Kong dollars.