In "The Big Banks," Citigroup: Lenovo's quarterly results exceeded expectations, maintaining an "Outperform" rating

Citi published a research report indicating that Lenovo Group (00992.HK) achieved third-quarter results for the fiscal year 2026 that exceeded market expectations, benefiting from strong revenue in the personal computer business and a 7.3% operating profit margin. With industry-leading profitability, the company expects its smart devices business group to record positive growth in 2026, driven by rising average selling prices due to demand for AI personal computers and high-end models. The company anticipates that its infrastructure solutions business group will turn profitable in the fourth quarter of the fiscal year 2026 and maintain profitability under restructuring measures.

The firm believes that Lenovo Group's outlook for 2026 is better than market concerns, expecting the group to pass on rising memory costs through retail price increases and improve its bargaining power with suppliers. The infrastructure solutions business group's return to profitability will also contribute to profit growth.

Based on robust personal computer margins and rising average selling prices, Citi raised its non-Hong Kong Financial Reporting Standards net profit forecasts for 2026 to 2028 by 7%, 11%, and 13%. Given that rising memory costs are putting pressure on shipment volumes in the personal computer industry, the firm lowered Lenovo Group's target price-to-earnings ratio from 11 times to 10 times, slightly raising the target price from HKD 10.3 to HKD 10.4, maintaining an "Outperform" rating