HSBC Research lowers Lenovo Group's target price to HK$12.2, expecting greater rise potential in fiscal year 2026

On August 16th, Jinshi data reported that the gross profit margin of Lenovo Group (00992.HK) for the first quarter ending in June was 16.6%, which was 45 basis points higher than the bank’s expectation, but lower than the market’s forecast of 17.3%; the operating profit margin was 3.2% lower than the bank’s and market’s forecast; the earnings per share of 2.02 US cents met the bank’s forecast and exceeded market expectations by 6%. The bank stated that looking ahead, as the group continues to invest in servers to develop more advanced AI models, it is expected that its server business will continue to record net losses in the 2025 fiscal year. Although it is expected that with the continuous recovery of the server market and the improvement of revenue scale, the losses may continue to narrow in the next few quarters, it is still difficult to achieve a balance of income and expenditure in the 2025 fiscal year. The bank respectively lowered the group’s earnings forecast for the fiscal year 2025 to 2026 by 14% and 10%, and lowered the target price from HKD 13.5 to HKD 12.2, reiterating a buy rating.