Lenovo Group Limited's performance in the third quarter of fiscal year 2022 was better than we expected. Net profit of shareholders increased by 61.9% year-on-year to $640 million, mainly due to the increase in revenue and gross profit margin of each segment. Of this total, revenue increased by 16.7% over the same period last year, and gross profit margin rose by 0.5 percentage point to 16.7%.

We expect the smart device business group's revenue to grow at double-digit year-on-year growth in the fourth quarter of fiscal 2022. Due to supply-side challenges, we expect PC shipments to slow in the fourth quarter of fiscal 2022, but we expect PC business revenue to continue to grow year-on-year in the fourth quarter of 2022 due to the increase in average selling prices due to improved product mix. We expect the smartphone business to grow rapidly year-on-year in the fourth quarter of fiscal 2022.

We expect Infrastructure Solutions Business Group and Programme Services Business Group to grow at double-digit year-on-year rates in the fourth quarter of fiscal 2022. We expect that with the gradual easing of the shortage of chips, the backlog of orders from customers will be gradually fulfilled in the future. We expect the Infrastructure Solutions Business Group to achieve double-digit growth in the fourth quarter of fiscal 2022 and steady growth in fiscal 2023. Due to the service-led transformation strategy and the large and growing user base of commercial PC and SME IT infrastructure, we expect the solution services business to have the opportunity to further expand through cross-selling.

We raised our target price from HK $9.50 to HK $9.75 and maintained our investment rating of "collection". We raised our earnings per share forecasts for fiscal year 2022-2024 by 11.9% / 20.3% / 20.9% respectively. The target price is equivalent to 7.6x, 7.0x and 6.9x price-to-earnings ratio for fiscal year 2022-2024.