Jitong Finance learned that Minsheng Securities released a research report stating that it maintains a 'recommended' rating for Lenovo Group (00992) and expects to achieve a net profit of 1.215/1.545/1.902 billion US dollars in FY25/FY26/FY27. All of the company's businesses have shifted from recovery to rapid growth, with clear upward trends by the quarter. The bank believes that the company is expected to continue to maintain a leading position in AIPC and achieve new breakthroughs in the server field.

On August 15, Lenovo Group released its FY2025 first quarter report, with FY1Q25 revenue of 15.447 billion US dollars, YoY +20%, QoQ +12%; net profit of 0.243 billion US dollars, YoY +38%.

The main points of the report are as follows:

FY1Q25 revenue growth in double digits, significant strategic transformation.

FY1Q25 company's revenue achieved the first double-digit growth year-on-year and quarter-on-quarter in the past two years; the sales gross margin reached 16.57%; the net profit margin was 1.64%, YoY +0.2pct, and the decline in gross profit margin/net profit margin on a quarter-on-quarter basis was mainly due to the volume of low-profit-margin server-related businesses. The company is committed to research and development innovation, with R&D expenses of FY1Q25 reaching 0.476 billion US dollars, a YoY increase of 6%. Non-PC businesses accounted for 47%, an increase of 5pct YoY, reaching a historical high, and the effect of strategic transformation is remarkable.

IDG: AIPC market feedback is positive, high-end smartphones have impressive growth.

FY1Q25 achieved revenue of 11.422 billion US dollars, YoY +11%, QoQ +9.2%; achieved operating profit margin of 7.3%, YoY +1pct. Lenovo's PC business market share in FY1Q25 reached 23%, maintaining the world's first position; driven by AIPC and brand effects, Lenovo's high-end PCs accounted for 32%, YoY +3.4pct, and high-profit commercial PCs accounted for 70%. Lenovo's first batch of AIPCs with 5 major features was launched in China in May this year, and the market feedback is positive. According to Canalys, Lenovo's AIPC shipments in Q2 2024 increased significantly by 228% QoQ, significantly better than the industry's 127%. The company plans to release more global AIPC products at this year's IFA and Innovation Technology Conference. Lenovo's smartphone and tablet business achieved high-speed growth of around 30% YoY, and the proportion of high-end smartphone products was increased significantly by 14pct, driven by products such as Razar folding screens.

ISG: Improved profitability, embracing hybrid infrastructure.

Benefiting from the volume of AI servers and the expansion of traditional servers, the business achieved revenue of 3.16 billion US dollars in FY1Q25, YoY +65%, QoQ +24.8%. Benefiting from the accelerated growth of cloud service IT infrastructure business, revenue reached a new high, and operating losses narrowed significantly. In terms of AI servers, the company achieved a 20%+ increase in AI intelligent server reserves and a 50%+ increase in orders. The GB200 server has clear requirements for liquid cooling, and the company has been deeply involved in liquid cooling technology for more than ten years. The quarterly revenue of the 'Poseidon' liquid-cooled server increased by 55% YoY, reaching a historical high, and is expected to achieve better market share in new products such as GB200.

Saudi sovereign wealth fund investment, helping to expand in the MEA region.

On May 28, 2024, the company announced that it had signed a strategic cooperation framework with ALAT (a wholly-owned subsidiary of the Saudi sovereign wealth fund Public Investment Fund), and the company will establish a regional headquarters and R&D in Saudi Arabia. , Manufacturing center, further expand its business in the Middle East and Africa (MEA) region. Alat will provide Lenovo Group with a 2 billion US dollars zero-coupon convertible bond investment, providing sufficient cash and no interest costs for the company's development, demonstrating sufficient confidence in Lenovo's development.