Lenovo Holdings is a diversified investment holding company rooted in China and looking at the world. The industry covers various fields such as IT, financial services, innovative consumption and services, agriculture and food, advanced manufacturing and professional services, and also includes financial investment. It owns many listed companies. The “strategic investment+financial investment” two-wheel drive has always been a unique business model of Lenovo Holdings.
The strategic investment sector has created leading companies with many independent intellectual property rights, such as Lenovo Group (992.HK) and Lianhong Xinke (003022.sz). Among them, the IT business that contributes more than 92% to the company's revenue is mainly the IT business carried out by Lenovo Group. Lenovo Group is a Fortune Global 500 company that develops, produces and sells high-end technology products, and provides various related services to consumers and enterprises. The company directly and indirectly holds 31.45% of the total shares of Lenovo Group, approximately HK$34.3 billion; it holds 51.77% of Lianhong Xinke, or HK$25.1 billion.
Other categories of strategic investment, such as agriculture and food, financial services, advanced manufacturing and professional services, and innovative consumption and services, mainly focus on excellent sectors, with high-tech, medical, and consumer companies, such as the company holding: 1) Bank of Luxembourg, which accounts for nearly 89.98% of the Bank of Luxembourg; 2) China Eastern Logistics (601156.sh), which completed the issuance of A-shares on the Shanghai Stock Exchange. Lenovo Holdings holds 18.09% of its shares, approximately HK$13.49 billion. In addition, the company recently invested 150 million yuan to increase its capital in biodegradable materials PLA business.
In terms of financial investment, the company keenly grasped market opportunities, and its funds invested in more than 1,000 enterprises. Recently, Lenovo Holdings strategically invested in Fuhanwei (300613.sz) through a two-wheel drive model to lay out the semiconductor circuit. Lenovo Holdings will hold a total of 15.94% of Fuhanwei's shares, approximately HK$3.22 billion. As of this report date, the price per share has exceeded the average cost per share, and there is still room for future growth.
Investment advice: Lenovo Holdings relies on a strong research and consulting team to actively grasp policy dividends; its strategic investments and financial investments are invested in a wide range of companies and are on a high-quality circuit. Taking into account the 2020 Annual Report and the latest market data, we estimate that the company currently holds a market value of over HK$110 billion and net debt of HK$73.7 billion. Currently, the company's valuation is low, so it is recommended to buy on dips. Bloomberg's average target price is HK$14.85, corresponding to an upward margin of 7.92%, which is equivalent to the estimated price-earnings ratio of 4.8x/4.6x for 2021/2022.