Event
Lenovo Group Limited held a special investor exchange meeting on "setting up ladder Crossing cycle" on October 25 to showcase the company's latest layout in advanced computing, artificial intelligence and other cutting-edge science and technology fields. The company revolves around the "end, edge, cloud, network, intelligence" technology, using its own intelligent experience in vertical industries to help traditional industries achieve digital intelligence upgrading.
Brief comment
The omni-directional layout of end-edge cloud network intelligence has achieved remarkable results in strategic transformation. As of June 30, 2022, the company's non-PC business accounted for 37% of total revenue. Through nearly six years of technological transformation, the company has broadened its strategic direction and achieved steady business growth in mobile phones, servers, solutions and other fields.
The equipment is deeply integrated with self-developed artificial intelligence, edge computing and other technologies. At present, the company ships more than 100 million sets of hardware equipment, all of which are integrated into the intelligent technology developed by the company.
Visual technology helps mobile phones to detect heartbeat and sitting posture, etc.; voice technology helps tablets and computers to automatically recognize and generate multilingual text; and smart home uses edge computing technology to achieve one-click manipulation, information transmission between families and other functions to facilitate daily life.
Power hybrid cloud and private cloud, endogenesis and externalization promote the development of the company's cloud business. In recent years, digital transformation has driven the acceleration of the cloud process in enterprises, and the public cloud model has been unable to meet the cloud needs of enterprises. Private cloud, multi-cloud and hybrid cloud have become an important direction of the cloud computing market.
As a large global enterprise, the self-developed Lenovo hybrid cloud has realized the management of the company's huge and complex business requirements. Based on the full experience of internal use, the company provides private cloud and hybrid cloud services to customers in various industries, realizing the endogenesis and externalization of the products.
Actively invest in research and development, aiming at the post-epidemic era industrial meta-universe market. Based on its many years of experience in solution deployment in various vertical industries, the company has built an intelligent transformation of the industry in manufacturing, education, power and other industries, focusing on the layout of toB's metacosmos business. In terms of products, the company launched AR/VR equipment enabling high-end intelligent manufacturing, robot inspection equipment enabling power inspection and other scenarios.
The company actively invests in R & D, and proposes at the end of 2021 that R & D investment will double in the next three years, forming a three-tier R & D system, focusing on innovation-driven service-oriented intelligent transformation. We believe that the revenue share of the company's ISG and SSG divisions will further increase to make up for the performance pressure caused by the decline in PC shipments.
In view of the current weak global PC demand, we slightly downgrade our profit forecast and expect the company's FY23-FY25 operating income to be 668max 702 / 73.8 billion yuan and net profit to be 2.91 billion USD respectively. Maintain 6 times FY2023 PE and "buy" rating and update the target price to HK $7.90.
Risk Tips:
1. Risk of PC demand decline: affected by the epidemic, global PC demand increased on a large scale in 2020 and 2021, while PC shipments declined year-on-year in the first three quarters of 2022. According to the latest statistics released by IDC, global PC shipments fell 15 per cent in the third quarter of 2022 compared with the same period last year.
The company's PC business accounts for more than 60% of revenue, and further weakness in global PC demand could lead to lower-than-expected revenue growth.
2. The company's innovation business development is less than expected risk: the company has invested heavily in R & D in the past two years, with the goal of doubling R & D investment within three years, and actively arranging industrial meta-universe, artificial intelligence, vehicle-road coordination and other fields. At present, the contribution of the above R & D direction to the company's revenue is limited, if the future R & D progress and landing orders are lower than expected, unable to cover the previous large-scale R & D investment, it may have a negative impact on the company's performance.
3. The risk of global macro environment change and supply chain obstruction: as a global ICT manufacturer, the company has business coverage in more than 160 countries and regions, and the current global macro environment is uncertain. The supply chain is affected to a certain extent due to epidemic and economic development, which may be disadvantageous to the company's overseas product shipments.