Lenovo'S Stock Price Doubled In Two Months

Lenovo Group (HKSE: 992) (ADR: LNVGY) once again released a record high performance report with multiple indicators in this fiscal quarter.

On February 3, Lenovo Group announced the third quarter results of fiscal year 20 / 21 as of December 31, 2020. According to the financial report, the turnover of Lenovo Group reached 114.2 billion yuan in this fiscal quarter, a record high of 22.3% year-on-year growth. The pre tax profit reached 3.9 billion yuan, up 51.6% year on year. Net profit reached 2.6 billion yuan, up 53.1% year on year.

It should be noted that in this fiscal quarter, all the main businesses of Lenovo Group achieved revenue and profit improvement. Among them, the turnover of personal computer and intelligent equipment business of IDG intelligent equipment business group reached 92.8 billion yuan, with a year-on-year growth of 26.5%. Pre tax profit reached 6.12 billion yuan, up 35% year-on-year, both reaching new highs. The profit margin further reached a record 6.6%. The turnover of DCG data center business group reached an all-time high of 10.82 billion yuan, and the profit margin increased by 1% year on year.

Lenovo shares rose 4.63% to HK $10.16 to HK $122.344 billion at the end of the day. Compared with HK $5.5 in early December 2020, the company's share price nearly doubled in two months. Recently, Citibank raised Lenovo's target price to HK $11.8 from HK $6.8 in the past.

Lenovo's global PC market share reached 25.3% in the quarter. Photo by Gan Jun

The performance of the whole line increased greatly

In 2020, the continued boom in the global PC market will also be transmitted to the financial report of PC overlord Lenovo.

According to the financial report, the turnover of personal computer and intelligent equipment business in the group reached 92.8 billion yuan, up 26.5% year on year. Pre tax profit reached 6.12 billion yuan, up 35% year-on-year, setting a new record.

Lenovo's global PC market share reached 25.3% in the quarter, opening a gap with HP (20.9%). According to Yang Yuanqing, chairman and CEO of Lenovo Group, Lenovo's sales in all regions have achieved strong double-digit growth. The sales volume in China increased by 30.4% year-on-year, the sales volume in North America increased by 60% year-on-year, and the profit margin of Asia Pacific market set a record high. The sales volume of EMEA market increased by 17.4% year-on-year, becoming the champion for the first time.

At the same time, in the global market, Lenovo's all sub categories including workstations, chromebooks, lightweight, graphics workstations and game books have achieved strong double-digit turnover and shipment growth. The sales volume of tablet computers has increased by 120%, reaching a record of more than 6.2 million units.

It should be noted that the brilliant performance of Lenovo PC this time is realized against the background of global supply chain shortage. In an interview with reporters including the 21st century economic report, Yang Yuanqing pointed out that the current quarterly supply is also tight, but production capacity is no longer a problem.

"We have orders for the next quarter on hand. Lenovo takes advantage of its operation advantages and good relationship with suppliers to ensure shipment to the maximum extent. Even if the supply chain is still short of supply, Lenovo's strong growth momentum will not change. " Yang Yuanqing said.

"There is a supply chain shortage in the market at present. There is a certain degree of supply shortage in key accessories such as panels, including processors and graphics cards," Chen Shuxin, research manager of China's PC field at IDC, told 21st century economic news. "PC enterprises need to make strategic deployment as much as possible and purchase key parts in advance."

In addition to PC business, in MBG mobile business group, Lenovo also recovered in this fiscal quarter, with a turnover of 10.07 billion yuan, a year-on-year increase of 10.1%. It also recovered profits for the first time since the outbreak of the epidemic, and reached a new profit record of 67 million yuan.

DCG data center business group also achieved a record high turnover in this fiscal quarter, reaching 10.82 billion yuan, and its profit margin increased by 1% year-on-year. Among them, cloud service IT infrastructure and enterprise IT infrastructure business have achieved year-on-year growth, and the growth rate is higher than that of the big city. The turnover of enterprise IT infrastructure business has reached 6.6 billion yuan, the highest in three years. The turnover of storage business reached a new high, with a year-on-year growth rate of 11 percentage points higher than that of the big city. At the same time, software defined infrastructure and services business turnover also reached new highs.

In addition, Lenovo's intelligent transformation business continued to grow strongly. Among them, the turnover of software and services increased to nearly 9.2 billion yuan, up 35.9% year-on-year, setting a new record. Compared with the same period of last year, additional software and services increased by 26.2%, operation and maintenance services increased by 72.7%, and solution services increased by 49.3%. Device as a service business has achieved a rapid growth of 74%. In addition, the e-commerce business increased by 45% year on year, which also reached a record high.

In this fiscal quarter, dibg data intelligence business group achieved a turnover of 190 million yuan, with a strong growth of 39% year-on-year and a 44% growth on a month on month basis; profits increased by 52% and 31% year-on-year. 59 new industrial enterprise customers were served, with a total of 339.

Organizational structure changes

At the same time, Lenovo Group announced a new organizational structure and established a new business group: Solutions & Services Group (SSG).

According to reports, the group will integrate the service teams and capabilities of various business departments within the group, and is committed to promoting the growth of industry intelligent solutions, equipment services, operation and maintenance services and "x-as-a-service" businesses including device as a service (DAAS) and truscale, so as to build the core driving force for the company's transformation.

The new organizational structure adjustment will take effect in 2021 / 2022 and will be implemented from April 1, 2021. In the future, Lenovo's core business will be composed of three business groups: IDG intelligent equipment business group focusing on Intelligent Internet of things, ISG infrastructure solution business group focusing on Intelligent Infrastructure (renamed from DCG, data center business group), and SSG solution service business group focusing on industry intelligence and services.

IDG will be led by Luca Rossi, the current senior vice president and President of EMEA and Latin America for personal computers and smart devices. The former head of IDG, ISG, will continue to be led by Kirk SKAUGEN, while the new SSG will be led by Ken Wong, current senior vice president and Asia Pacific president of personal computers and smart devices.

At the same time, in order to further promote the collaboration and cooperation between different business departments, Lenovo will integrate the original regional system into two new sales organizations: China region and international sales organization. China will be led by Liu Jun (now executive vice president and President of the intelligent devices business group in China), while international sales organizations will be led by Matt Zielinski, senior vice president and President of PC and smart devices North America.

"The current stock price can reflect the nature and growth of Lenovo's business, as well as the market's growing recognition of Lenovo and its 3S strategic direction." Yang Yuanqing pointed out that at present, Lenovo's strategy led by the three directions of intelligent Internet of things, intelligent infrastructure and industry intelligence has become increasingly clear, which also constitutes a continuous driving force for future performance growth.

In addition, Yang Yuanqing also talked about the reasons for Lenovo Group's return to the science and technology innovation board. "Lenovo is Chinese. We hope that more Chinese investors can participate in our development. At the same time, the layout of China's new infrastructure also has many development opportunities that can match Lenovo's 3S strategy." "As a Chinese company, we have always wanted to be able to return to A-share listing, and now we are one of the first overseas red chip companies to return to A-share. We hope that through this, we can have more communication with the majority of investors in the future. "

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