The company achieved revenue of US $34 billion (yoy:-2%) and gross profit margin of 16.9% (+ 0.1pct) in the mid-term results of fiscal year 22A23. With a net profit of $1.06 billion (yoy: 8 per cent) and a net interest rate of 3.21 per cent (+ 0.2pct), it is strong in profitability and is gradually achieving the group's medium-term financial goal of doubling its net profit margin.
Demand in the high-end and commercial markets is strong, and PC's revenue side outperforms shipments. Global PC business is in the doldrums, and IDC expects global PC shipments to fall by 12.8% in 2022 compared with the same period last year. Lenovo's shipments also declined, with revenue of $27.99 billion (- 6.7% compared with the same period last year) in the middle of the fiscal year for smart devices (IDG). Despite weak global consumption and supply constraints caused by the epidemic, Lenovo smart devices outperformed the global PC market due to growth in high-end revenue and strong demand in the commercial market, where the revenue side outperformed shipments.
Non-PC business is growing strongly, "going through the cycle" by upgrading business models and technological innovation. The company lays out in advance and is committed to "going through the cycle" by upgrading its business model and technological innovation, moving up the value chain and upgrading from a hardware supplier to a service-oriented, innovation-driven solution provider.
1) with the upgrading of the business model, the revenue of the SSG division is growing rapidly. In the middle of fiscal year 22, SSG achieved revenue of US $3.18 billion (yoy:+24.7%), and its operating profit increased by 27% compared with the same period last year, which was higher than the growth rate of the group. Among them, the turnover of non-hardware services such as operation and maintenance services and solution services continued to increase in SSG, reaching 52%, operation and maintenance services increased by 69%, and solution services increased by 21%.
2) the income of the ISG division is at a record high compared with the same period last year, and its revenue and product shipments have set a new record. Infrastructure Solutions (ISG) achieved revenue of US $4.7 billion (yoy:+23.6%), an all-time high, increased contributions from cloud service customers, record revenue from servers and storage, shipments from AI edge computing, and double-digit growth in server and storage sales.
We forecast earnings per share of US $0.16,0.18 and US $0.20 for fiscal year 2022-2024 (the original forecast for 22-24 was US $0.19,0.21 and US $0.24, mainly reducing revenue from PCs and smart devices) and maintained the buy rating according to the comparable company's 22-year valuation of 7.29 times PE, corresponding to a target price of HK $9.09 (US $1.7.85).
Risk hint
The prosperity of the PC industry is declining, the competition in the industry is intensified, the cloud computing boom is not up to expectations, and customer introduction is not as expected.