The Zhitong Finance App learned that Minsheng Securities released a research report stating that maintaining the “recommended” rating of Lenovo Group (00992), FY4Q24 Group's ISG, IDG, and SSG business segments have shown strong recovery and growth momentum. Looking ahead to FY2025, it is expected that various businesses will shift from recovery to rapid growth, and the upward trend is clear from quarter to quarter. It is expected that FY25/FY26/FY27 will achieve net profit of 12.15/15.47/1.903 billion US dollars. As a leader in the PC and server industry, the company has strong global competitiveness. The bank is optimistic that full-stack AI will drive the company's long-term growth.

Incident: On May 23, Lenovo Group released its 2024 annual report. FY2024 achieved revenue of US$56.864 billion, YoY -8%; net profit of US$1,011 million, YoY -37%. The results surpassed previous market expectations.

The main views of Minsheng Securities are as follows:

FY4Q24's profit increased year-on-year, and the share of non-PC businesses reached a record high.

FY4Q24 achieved revenue of US$13.833 billion, YoY +9%, continuing the year-on-year growth trend that began in the previous quarter; achieved net profit of US$248 million and YoY +118%, ending five consecutive quarters of decline and starting positive growth for the first time. The company's net profit margin in a single quarter reached 1.83%, YOY+0.99pct, and profitability recovered significantly. The company's non-PC business accounted for 44.7%, YOY+1.5pct, a record high, and the strategic transformation effect was remarkable.

ISG: FY4Q24 has strong revenue and is optimistic about AI server growth in the new fiscal year.

FY2024 achieved revenue of **** billion US dollars, YoY -9%; FY4Q24 achieved revenue of 2.5 billion US dollars, YoY +15%, a record high in a single quarter; among them, the company's storage, service and software revenue increased 48% year over year, making it the third largest storage service provider. Furthermore, in the global HPC market share ranking of the top 500, Lenovo ranked first in the world. The ISG business lost US$240 million in operating profit for the full fiscal year, mainly due to increased AI server R&D expenses (FY2024 Group's share of R&D personnel and R&D expenses were 26.3% and 3.6%, respectively, all record highs), restrictions on card acquisition, and a slowdown in traditional server iteration, which dragged down the company's performance. With the liberalization of the supply of computing power cards, the company's product matrix continues to be enriched. With the release of 9 new NVDIAAI products, FY4q24 has more than 7 billion US dollars of AiPipeline in hand. Looking forward to the future, the business is expected to further break through major core customers and reverse losses in the new fiscal year.

IDG: PC sales lead the industry, and AIPC can be expected in the future.

FY2024 achieved revenue of 44.6 billion US dollars, YoY -10%, and the product structure upgrade brought operating profit margin to 7.4%, close to the historical peak; FY4Q24 achieved revenue of 10.5 billion US dollars, YoY +7%, operating profit of 773 million US dollars, YoY +17%. In terms of PC business, according to IDC data, 1Q24 global PC sales increased 1.5% year on year. Driven by strong commercial PCs, Lenovo's PC sales increased 8% year on year, significantly superior to the industry. The market share reached 23%, continuing to rank first in the industry. FY4Q24 smartphone shipments increased 23% year over year, mainly due to strong sales of the foldable Razr, and the high-end product portfolio reached a record high.

Looking ahead to 2024, Microsoft launched a major AI upgrade for Copilot+P****novo's new AIPC product with five major characteristics has also been put on sale. It is equipped with the personal intelligence “Xiaotian”, which can effectively improve office and life efficiency; the company expects the total PC market to return to higher than before working from home. The bank believes AIPC may usher in accelerated implementation of commercial orders in the second half of the year. With its leading AIPC layout, the company is expected to continue to lead the industry's growth.