Nominal 
ECONOMY TODAY NEWS (June 13) — Lenovo Group (00992) stunned the market with its remarkable fourth-quarter performance last year, and has continued its strong momentum into the first quarter of the new fiscal year. Adjusted profit attributable to equity holders surged 1.76-fold year-on-year to USD 1.075 billion, surpassing the USD 1 billion milestone for the first time; revenue rose 43% year-on-year to HKD 26.9 billion, setting another record high for a single quarter, with both profit and revenue exceeding market expectations.
Following the earnings announcement, Lenovo's share price soared by as much as 20%, yet market views on its future outlook have diverged. Some experts remain optimistic, citing strong demand for Lenovo's AI servers, which could double order volumes in its Infrastructure Solutions segment next quarter, creating a golden era driven by high margins and fully loaded production capacity. However, other analysts express caution, warning that if its three major customers reduce AI capital expenditure and lower demand for AI equipment, future order performance could be dragged down.
*Li Ming-tak: Infrastructure Solutions Segment Shines, Future Earnings Promising*
Li Ming-tak, Fund Manager at Dashing Asset Management, told ECONOMY TODAY NEWS that Lenovo's results significantly exceeded his expectations, with all three business segments benefiting notably from the AI industry wave, among which the Infrastructure Solutions Group delivered the most pleasant surprise. He pointed out that surging demand for AI servers has directly doubled order volumes in the Infrastructure Solutions segment, with a substantial backlog of unfulfilled orders, suggesting continued strong performance in the next fiscal quarter. He emphasized that AI servers generally command higher gross margins than traditional servers, and combined with abundant orders, from a manufacturing perspective, simultaneously achieving high margins and fully loaded capacity represents the ideal state for corporate operations. In the short term, Lenovo's share price could target HKD 40, and he suggests investors without positions consider buying below HKD 33, with a medium-to-long-term target price of HKD 45.
*Tang Lai-hung: Reduced Capital Spending by Three Major Customers May Impact Lenovo's Future Orders*
However, Tang Lai-hung, Global Markets and Forex Strategist at Everbright Securities International, believes it remains to be seen whether Lenovo can sustain such impressive performance in the next fiscal quarter. She noted that as the world's largest personal computer manufacturer, Lenovo's fundamentals are indirectly reflected by the strong stock performance and robust cash flow of its three major customers—Micron Technology, Samsung, and SK Hynix—during the first half of this year. However, from May to June, the share prices of Micron, Samsung, and SK Hynix all experienced notable pullbacks, possibly signaling a potential slowdown in Lenovo's operational growth next quarter. Moreover, after a significant correction in the chip sector in July, market concerns have emerged over corporate overexpansion in AI capital spending eroding cash flow. Today's market rumors also suggest Samsung and SK Hynix are planning to return excess cash to investors through cash dividends and increased payouts. If these three major customers turn conservative on AI-related capital expenditure and reduce procurement demand, it would directly impact Lenovo's future order intake and weigh on its stock performance. Therefore, unless the AI server market experiences another round of explosive growth, her outlook for the next quarter remains relatively cautious.
Additionally, Tang Lai-hung added that potential supply constraints in upstream AI chips, such as NVIDIA's supply chain, as well as the delivery progress of the Infrastructure Solutions segment, could also affect Lenovo's future performance. Considering Lenovo had already gained over 20% prior to the earnings release, she suggests investors with existing positions consider locking in profits around HKD 35.2. (nw)
Following the earnings announcement, Lenovo's share price soared by as much as 20%, yet market views on its future outlook have diverged. Some experts remain optimistic, citing strong demand for Lenovo's AI servers, which could double order volumes in its Infrastructure Solutions segment next quarter, creating a golden era driven by high margins and fully loaded production capacity. However, other analysts express caution, warning that if its three major customers reduce AI capital expenditure and lower demand for AI equipment, future order performance could be dragged down.
*Li Ming-tak: Infrastructure Solutions Segment Shines, Future Earnings Promising*
Li Ming-tak, Fund Manager at Dashing Asset Management, told ECONOMY TODAY NEWS that Lenovo's results significantly exceeded his expectations, with all three business segments benefiting notably from the AI industry wave, among which the Infrastructure Solutions Group delivered the most pleasant surprise. He pointed out that surging demand for AI servers has directly doubled order volumes in the Infrastructure Solutions segment, with a substantial backlog of unfulfilled orders, suggesting continued strong performance in the next fiscal quarter. He emphasized that AI servers generally command higher gross margins than traditional servers, and combined with abundant orders, from a manufacturing perspective, simultaneously achieving high margins and fully loaded capacity represents the ideal state for corporate operations. In the short term, Lenovo's share price could target HKD 40, and he suggests investors without positions consider buying below HKD 33, with a medium-to-long-term target price of HKD 45.
*Tang Lai-hung: Reduced Capital Spending by Three Major Customers May Impact Lenovo's Future Orders*
However, Tang Lai-hung, Global Markets and Forex Strategist at Everbright Securities International, believes it remains to be seen whether Lenovo can sustain such impressive performance in the next fiscal quarter. She noted that as the world's largest personal computer manufacturer, Lenovo's fundamentals are indirectly reflected by the strong stock performance and robust cash flow of its three major customers—Micron Technology, Samsung, and SK Hynix—during the first half of this year. However, from May to June, the share prices of Micron, Samsung, and SK Hynix all experienced notable pullbacks, possibly signaling a potential slowdown in Lenovo's operational growth next quarter. Moreover, after a significant correction in the chip sector in July, market concerns have emerged over corporate overexpansion in AI capital spending eroding cash flow. Today's market rumors also suggest Samsung and SK Hynix are planning to return excess cash to investors through cash dividends and increased payouts. If these three major customers turn conservative on AI-related capital expenditure and reduce procurement demand, it would directly impact Lenovo's future order intake and weigh on its stock performance. Therefore, unless the AI server market experiences another round of explosive growth, her outlook for the next quarter remains relatively cautious.
Additionally, Tang Lai-hung added that potential supply constraints in upstream AI chips, such as NVIDIA's supply chain, as well as the delivery progress of the Infrastructure Solutions segment, could also affect Lenovo's future performance. Considering Lenovo had already gained over 20% prior to the earnings release, she suggests investors with existing positions consider locking in profits around HKD 35.2. (nw)
