Citi: Maintains "Buy" rating on Lenovo Group, Q1 results reinforce AI-driven structural growth narrative.

Citigroup issued a research report indicating that Lenovo Groups performance for the first quarter of the 2026/27 fiscal year, ending in June, was strong and well above expectations, further reinforcing the narrative of structural growth driven by artificial intelligence. During the period, revenue increased by 43% year-on-year to $26.943 billion, setting a quarterly historical record, and exceeding Citigroup and market expectations by 24% and 20%, respectively. Non-GAAP net profit soared 176% year-on-year to $1.075 billion, surpassing Citigroup and market expectations by 64% and 149%, respectively, while the non-GAAP net profit margin widened to 4%. Citigroup stated that based on the classified summation valuation method, it set a target price for Lenovo Group at HKD 31, which corresponds to a projected price-to-earnings ratio of about 13.6 times for the fiscal year 2028. Among these, the IDG and SSG businesses are valued at a P/E ratio of 10 times, while the ISG business is valued at 16.7 times, in line with industry levels. The bank maintains a "Buy" rating on Lenovo Group, optimistic about the strong demand prospects and profitability in servers, as well as the stable performance of personal computers, smartphones, and services.