Nomura lowers Lenovo Group's target price to 11 yuan due to rising memory prices causing cost pressure

Nomura published a research report stating that due to the increase in memory prices since September, the stock prices of Lenovo Group (00992.HK) and Xiaomi (01810.HK) have fallen by 14% and 25% respectively since October, while the Hang Seng Index has only decreased by 3% during the same period.

The firm believes that although the significant rise in memory prices may have been reflected in market consensus early on, the impact of rising costs on downstream companies is expected to fully manifest only in the first quarter of next year. In addition to memory prices, the firm pointed out another risk overlooked by the market is the CPU supply constraints from Intel (INTC.US), and the prices of the new generation of CPUs to be launched next year will be higher. Therefore, Nomura expects the market to lower its earnings forecasts for Lenovo in the coming quarters.

Nomura has cut its earnings forecast for Lenovo for the fiscal years 2026 to 2027 by 5% to 16%, downgrading its rating from "Buy" to "Neutral," and lowering the target price from HKD 14 to HKD 11.

Nomura indicated that although personal computer companies seem not to have taken into account the expected slowdown in shipment growth for 2026, considering that rising costs may negatively impact end demand, and some replacement demand has already occurred in 2025, the firm estimates that the overall personal computer market growth may decline by 0% to 5% year-on-year. However, due to Lenovo's higher sales proportion in the commercial market, the firm believes its performance may outperform the overall personal computer market