Bank of America Securities lowers target price for Lenovo Group (00992.HK) to 10 Hong Kong dollars, tariffs pump may bring higher costs

Bank of America Securities stated in a report that Lenovo Group (00992.HK) recorded a profit of $359 million for the second quarter of the fiscal year 2025 ending in September, a quarterly increase of 47% and an annual increase of 44%, surpassing the bank’s and market’s expectations by 8% and 5% respectively, mainly due to the better performance of the PC market. The revenue was $17.8 billion, a quarterly increase of 16% and an annual increase of 24%, surpassing the bank’s and market’s expectations by 11% and 10% respectively. However, the gross margin did not meet expectations due to a higher proportion of server sales. Bank of America Securities raised its profit forecast for Lenovo Group for the fiscal year ending in March 2025 by 2% to reflect its performance, and made minor adjustments to the profit forecast for the fiscal years 2026 to 2027. Potential US tariffs and geopolitical disputes may result in higher costs. The target price for Lenovo Group was lowered from HKD 11.6 to HKD 10. Rating: Neutral.