The current situation of the company
On October 25, Lenovo Group Limited held a special investor exchange meeting on innovative technology at the Beijing Future Center, at which the company leaders showed the whole picture of Lenovo Group Limited's technological innovation to investors from the new IT structure of "end-edge-cloud-network-intelligence". The company's three-level R & D system, composed of business R & D department, Lenovo Research Institute and Lenovo Venture Capital, builds a clear and perfect chain from innovation research to landing, focusing on short-term (1-2 years), medium-and long-term (3-5 years) and long-term (more than 5 years). Divided into three tracks into the group resources, committed to technological innovation to drive the company's sustainable and high-quality growth.
Comment
Short-term innovation around existing products, applications, and business models. Under the leadership of the R & D department of the business group, with the goal of improving profit margins, the company innovates the equipment, key components, applications and "all services" business model within the business framework of IDG, ISG and SSG. For example, it focuses on high-end PC such as lightweight books, game books and workstations on the PC side, and promotes the product ASP; to enter higher value-added areas such as storage and software on the infrastructure business side. And committed to achieve a service-oriented transformation, upgrading from a hardware supplier to a high-tech-driven solution provider.
In the medium term, relying on new technologies to incubate new business will help the second growth curve to rise steadily. The company has added five major directions: data intelligence, cloud-network convergence, edge computing, cloud services and AR/VR. Some of the innovations have entered the incubation stage, and we think the next growth engine may be in its infancy. Taking edge computing as an example, the company integrated the edge business such as hardware, software, solutions and services at the beginning of the year to set up an intelligent edge business department.
We believe that the company has three major advantages in the field of edge computing: 1) the company has full-stack edge computing hardware, including Internet of things gateway, light edge hardware, general-purpose and dedicated edge servers, and its products have strong market competitiveness; 2) independently develop the industry's first edge computing platform (LECP), which integrates heterogeneous lightweight virtualization, resource-aware application choreography and other technologies to support flexible deployment 3) the Lenovo Edge artificial Intelligence platform has been built to effectively solve the key problems of small number of data samples, difficult model construction and slow scene adaptation. In August this year, the platform was successfully evaluated as a benchmark case in the direction of Xin Tong Yuan Edge AI platform.
Long-term layout of core technologies and emerging technologies, carry out basic and breakthrough research to build Lenovo's long-term moat. With a long-term perspective, the company focuses on breakthrough technologies in the field of ICT such as new generation artificial intelligence and next-generation communication protocols; continues to explore new computing scenarios such as in-vehicle computing and metasmology, and accumulates core key technologies in the field of cutting-edge science and technology; based on large computing field, strengthens industry-university-research cooperation, and explores basic research for computing power sharing and data flow, such as advanced technology architecture of privacy computing and heterogeneous computing.
Profit forecast and valuation
We keep our profit forecasts for fiscal 2023 and fiscal 2024 unchanged. The current share price corresponds to a price-to-earnings ratio of 4.5 times earnings for 2023 Universe in fiscal year 2024. Maintain an outperform industry rating and a target price of HK $8.80, corresponding to 6.5 times the price-to-earnings ratio of 2023 and 5.3 times the price-to-earnings ratio of 2024, which has 45 per cent upside from the current share price.
Risk.
The R & D of cutting-edge technology fell short of expectations; the impact of chip shortage exceeded expectations; and the capital expenditure of cloud manufacturers slowed down.