DBS: Lenovo Group – Buy Target Price HK$11.90

Service-led transformation on track

• 1Q net profit increased 11% y-o-y to US$ 516m, ahead of themarket consensus by 6%, driven by margin expansion
• Operating margin increased 0.2ppt y-o-y to 4.6%, due to increased contribution from the service business
• Cut FY3/23 and FY3/24 earnings forecast by 13% and 4% to reflect the cut in shipment and margin assumption
• Lower TP of HK$ 11.9 on lower EPS; maintain BUY on a 19% FY22-25F earnings CAGR and an undemanding valuation