Lenovo Delivers Strong Results During Chip Shortage due to Better Mix; Increasing FVE to HKD 12.60

We raise Lenovo’s fair value estimate to HKD 12.60 from HKD 11.60, based on the robust December quarter results, mainly a result of the better product mix. We think the replacement demand for commercial PCs, which has been weak over the past two years due to the pandemic, is starting to pick up along with the reopening economy, more than offsetting the slowdown for consumer PCs because of its higher average selling price, or ASP. While our view is that Lenovo’s PC shipments will decline 2% year on year in fiscal 2022, we forecast PC revenue will increase 1% year on year, which is 11% above our previous number, as we believe that the trend will continue.