Company Coverage
Lenovo Group (992 HK): 1QFY27 Preview: Core Results Remain Solid, But GAAP Profit Impacted By Non-Cash Items
BUY (Maintained)
Current price:
Target price:
Upside:
HK$23.16
HK$32.80
+41.6%
Analyst
Analyst
Highlights
- We expect 1QFY27 non-IFRS net profit of US$609m, +56.3% yoy and +8.9% qoq, on revenue of US$22,434m, +19.1% yoy and +3.9% qoq. ISG is the standout.
- However, we are also expecting a US$1.68b non-cash fair value loss due to the ALAT warrant issued in 2024. This will swing reported net profit to a US$1b loss during the quarter.
- Maintain BUY and target price of HK$32.80. The market is already expecting the warrant-related fair value losses, and as such we should be focusing on the non-IFRS adjusted earnings instead.
Analysis
- Strong operating quarter, ugly headline. We expect 1QFY27 revenue of US$22,434m, +19.1% yoy and +3.9% qoq, gross margin of 16.5% (+1.8ppt yoy, +0.1ppt qoq) and adjusted operating profit of US$965m (4.3% margin). However, given that Lenovo Group’s (Lenovo) share price surged during the quarter from HK$9.15 to HK$23.02, we estimate a US$1.68b non-cash fair value loss due to its ALAT warrant which has an adjusted strike price of HK$11.92. This will push reported net profit to a US$1,071m loss (1Q26: US$505m profit). Stripping that out, non-IFRS net profit is US$609m, +56.3% yoy and +8.9% qoq.
Highlights
- We expect 1QFY27 non-IFRS net profit of US$609m, +56.3% yoy and +8.9% qoq, on revenue of US$22,434m, +19.1% yoy and +3.9% qoq. ISG is the standout.
- However, we are also expecting a US$1.68b non-cash fair value loss due to the ALAT warrant issued in 2024. This will swing reported net profit to a US$1b loss during the quarter.
- Maintain BUY and target price of HK$32.80. The market is already expecting the warrant-related fair value losses, and as such we should be focusing on the non-IFRS adjusted earnings instead.
Analysis
- Strong operating quarter, ugly headline. We expect 1QFY27 revenue of US$22,434m, +19.1% yoy and +3.9% qoq, gross margin of 16.5% (+1.8ppt yoy, +0.1ppt qoq) and adjusted operating profit of US$965m (4.3% margin). However, given that Lenovo Group’s (Lenovo) share price surged during the quarter from HK$9.15 to HK$23.02, we estimate a US$1.68b non-cash fair value loss due to its ALAT warrant which has an adjusted strike price of HK$11.92. This will push reported net profit to a US$1,071m loss (1Q26: US$505m profit). Stripping that out, non-IFRS net profit is US$609m, +56.3% yoy and +8.9% qoq.
BUY (Maintained)
Current price:
Target price:
Upside:
HK$23.16
HK$32.80
+41.6%
Analyst
Analyst
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