Investment Highlights Company Overview: From an IT company to a holding investment platform, strategy and financial investment go hand in hand. The company is divided into strategic investment and financial investment. The former covers the fields of IT, finance, innovative consumption and services, agriculture and food, and new materials; the latter covers all stages of enterprise growth opportunities through angel investment, venture capital, and private equity platforms. In April 2018, the company became the first pilot company for full circulation of H shares, and subsequent development became the focus of market attention. Furthermore, the company's listing period is about to expire for 3 years in June 2018, which meets the time requirements for the spin-off and listing of subsidiaries. Currently, La Cala Pay has applied for an IPO, and several subsidiaries and associated companies are planning to submit plans for listing, so the asset value is expected to increase as a result. Main business: The strategic investment of Lenovo Group represents the IT sector with the largest revenue share. In 2017, the company had revenue of 36.3 billion yuan (RMB, same below) (+7%) and net profit of 5.1 billion yuan (+4%), including strategic investment of 2 billion yuan, financial investment of 4.1 billion yuan, and unamortized expenses of 1 billion yuan. The IT business accounts for nearly 95% of revenue. Lenovo Group is the only investment in the sector, and Lenovo Holdings holds 29.1% of its shares. In recent years, due to the maturity of the computer market and low growth in company-related hardware shipments, the company's mobile product share has also declined, affecting the profitability of the sector. In 2017, the sector lost about 250 million dollars. Currently, the Lenovo Group has taken a number of measures to reduce costs, and the company expects the IT sector's profitability to improve. New field: strategic investment in a multi-faceted layout to create a new pillar of profit. The company achieved high growth rates in the finance, innovative consumption and services, agriculture and food sectors. The revenue CAGR for the past 3 years was 100%, 37%, and 74%, respectively. The financial business has formed a diverse ecosystem of financing, leasing, internet finance, banking, and insurance, with revenue growth of 130% in 2017. Innovative consumption and services, focusing on consumer upgrading fields such as medical care, transportation and logistics, and preschool education, etc. Revenue increased 32% in 2017. Agriculture and Food uses Jiawo Group as an investment platform, focusing on the entire fruit and aquatic products industry chain, and is actively expanding overseas markets and supply chains. Revenue increased 52% in 2017. The new materials sector has further focused, sold lithium power batteries, improved new materials management, and introduced strategic investments, and entered a stable profit stage. Financial investment: leading professional ability, fully covering the industry sector and enterprise stage. The company's net profit CARG for the past 5 years of financial investment was about 18%, and the average profit accounted for 63%. According to investment attributes, it can be divided into angel investment, Lenovo Star, with a management scale of over 2.5 billion; Junlian Capital, a venture capital, with a scale of over 35 billion; and Hongyi Investment, a private equity investment, with a scale of over 70 billion dollars. The professional competence and scale of each platform are in the first tier of the industry. The quality and quantity of the project portfolio are combined, and the average exit return rate is about 30% to 40%. Due to the wide range of investment fields, the company's overall profit growth and stability have been enhanced. Risk factors: IT business profitability has not improved, investment in innovative consumption and services is higher than expected, and systemic risk in capital markets affects the return on financial investment. Earnings forecasts, valuations and investment ratings. We forecast that the company's net profit in 2018/19/20 will be 5.4 billion/6.1 billion/6.3 billion yuan, respectively, and the corresponding stock price on May 9 will be 8/7/6 times PE. Referring to large multi-sector holding companies in Hong Kong stocks, we believe that the company's reasonable valuation should be 10 times PE in 2018, with a corresponding target price of HK$29, covering the “increased holdings” rating for the first time.