联想集团目标价上调至46港元，服务器业务表现强劲，评级从中性上调至买入

pipeline to drive sustainable expansionRatingChange:BUY|PO:46.00HKD/Price:34.90HKD Record results strengthen earnings outlook Uun Q) results proved strong server expansion across all fronts with operating leverage.Revenuewas USs26.9bn (+25%QoQ,+43%YoY),beating BofAe/consensus by22%/ 20%.Adj.earnings beat BofAe/consensus by 56%/68% at USs1.1bn (+92% QoQ, +176%YoY). We lift FY27-29E earnings by 44-74% to reflect the positives. We lift PO to HKS46(17x2QFY27E-1QFY28EP/E)fromHKS26.5(16xFY27EP/E)afteravaluationbaserollover and a higher P/E of 17x (slightly above historical peak P/E of 16x, justified by asuccessful business transformation).OurADRPOrises to US$117.69from US$67.20Solid deliveries across Neocloud, sovereign & enterprises KeyChanges high of 9.1% (vs 3.6% in 4Q FY26). The upbeat results were led by growth trajectoryfrom not only general cloud but also sovereign, Neocloud and enterprises (also see USsemi team's report). Lenovo's Al server pipeline also grew 157% QoQ to Uss54bn,suggesting sustainable growth. Our check with other OEMs/ODMs also indicates robustNeocloud demand. Besides CSP, we see enterprises business is improving, which couldsupport ongoing margin expansion.PC profitability sustainable Merrill Lynch (Taiwan)+886 2 2376 3731robert.cheng@bofa.comKatherine Zhu>>Research Analyst amid price hikes.However, we believe Lenovo should be relatively better positioned,given its high commercial exposure (~65%).Meanwhile, margin should remain resilient,supported by scale, procurement management, and better mix.Estimates (Mar) (USS)2025A2026A2027E2028E2029E Merrill Lynch (Hong Kong)+852 3508 3374kexin.zhu@bofa.comDoris Kao >>Research Analyst Merrill Lynch (Taiwan)+88622376 3722doris.kao@bofa.com Price (Common / ADR) Thisresearchreportprovidesgeneral informationonly.Nopart of this reportmaybeusedor reproduced or quoted in any manner whatsoever in Taiwan by the press or otherpersonswithouttheexpresswrittenconsentofBofASecurities.>> Employed by a non-US affiliate of BofAS and is not registered/qualified as a research analyst under the FINRA rules. Refer to 'Other Important Disclosures' for information on certain BofA Securities entities that takeresponsibility for the information herein in particular jurisdictions. BofA Securities does and seeks to do business with issuers covered in its researchreports. As a result, investors should be aware that the firm may have a conflict ofinterest that could affect the objectivity of this report. Investors should consider thisreport as only a single factor in making their investment decision.Objective Basis/Risk on page 8. For acronyms used in this report,please refer to Page 6 iQprofile s" LenovoGroupKey Income Statement Data (Mar)2025A PC Hardware Set up in 1989, Lenovo is the world's largest PC maker with around 25% market share. It is the leading PC brand inChina market with 30+% market share. In 2001, Lenovo(Legend) spun off its distribution and enterprise servicebusiness (Digital China, listed in Hong Kong) and became apure PC vendor. In 2004, Lenovo renamed itself from'Legend'. In May 2005, Lenovo announced the acquisitionof IBM's PC business for USS1.75bn. Lenovo mergedFujitsu's PC business into the company in May 2018. We have a Buy rating on Lenovo on stronger earnings expansion led by solid server pipeline across Neocloud Alserver, sovereign, general cloud and enterprise segment. Stock Data Shares / ADR20.00Price to Book Value5.7x Key Metrics We upgrade Lenovo to Buy from Neutral following a successful server delivery. 1Q FY27 Uun quarter) results demonstrated strong server expansion across all fronts withoperatingleverage.RevenuereachedUSs26.9bn(+25%QoQ,+43%YoY),beatBofAe/consensusby22%/20%.Adjusted earningsbeat BofAe/consensusby56%/68%atUS$1.1bn (+92% QoQ, +176% YoY).We lift FY27-29E earnings by 44-74% to reflect the positives. We raise our PO to HKS46 (17x2QFY27E-1QFY28EP/E)fromHKS26.5 (16xFY27EP/E)afteravaluationbaserollover and a higher P/E. 17x is slightly above its historical peak P/E of 16x, justified bya successful business transformation.OurADRPO comes to US$117.69 from USS67.2. Exhibit 3: We lift FY27-29E earnings by 44-74% Earnings estimate changes, FY27-29E Lenovo'sISG revenue reached USS8.5bn (+51%QoQ,+98%YoY)andOPMhitrecord high at 9.1% (vs 3.6% in 4Q FY26). The upbeat results was led by growth trajectory fromnot only general cloud but also sovereign, Neocloud and enterprises. Lenovo's Al serverpipeline also grew by 157% QoQ to US$54bn, suggesting a sustainable growth. Ourcheck with other OEMs/ODMs also suggests robust Neocloud demand. Besides CSP, wesee enterprises business is improving, which could support ongoing margin expansion.Exhibit 8: ISG sales grew by 98% YoY in 1Q FY27Exhibit 8: ISG's operating margin reached record high at 9.1% in 1Q FY27ISG's (server) operating margin trend, 1Q FY22-1Q FY27 10% PC profitability sustainableMgmt. expects PC industry to face ~15% YoY shipment decline in 1H FY27 (Ap