Shulou(Shulou.com)11/24 Report--

On September 5, S & P, one of the three major international rating agencies, issued a report that upgraded Lenovo's long-term issuer credit rating and unsecured note rating to "BBB", looking for stability. The stable outlook for Lenovo stems from its expectation that Lenovo's revenue growth will reach a high level in the next 24 months with the gradual recovery of PC business and steady growth in non-PC business and services, the report said.

In other words, one of the bases for S & P's upgrade of Lenovo is its belief that PC business will pick up, and this assessment is mainly based on IDC's calculation of a return to growth in the PC market.

Recently, the global quarterly personal computing device tracking report released by IDC shows that after the explosive years of 2020 and 2021, the road to recovery of personal computers (PC) has been challenging, but the signs of growth are finally returning. IDC expects PC shipments to grow 3.7 per cent year-on-year to 261.4 million units in 2024 and about 290 million PC shipments in 2027, with a compound growth rate of 3.1 per cent from 2023 to 2027.

IDC pointed out that Microsoft will stop Win10 system in 2025, which is expected to promote a new round of PC trend from both corporate and personal point of view, and then promote the development of the PC industry. In addition, the popularity of technologies such as generative AI will be another important factor in promoting the development of the PC industry, and AI PC will usher in a new round of outbreak in the future.

As the PC market returns to growth, Lenovo, the industry leader, is expected to benefit first. According to the Chinese mainland PC market report released by Canalys in the second quarter of 2023, overall shipments of 2023Q2 personal computers, including desktops, notebooks and workstations, are still in a declining state, and the grim situation in the PC market is unabated, but Lenovo Group's performance in the domestic PC market is still strong, with shipments of 3.25 million sets, ranking first in market share.

It can be seen that Lenovo Group PC business has a deep moat, a solid position in the industry, and greater opportunities for deterministic growth, and most brokerage institutions are unanimously optimistic about it. Haitong International released a research report saying that it is optimistic that Lenovo will continue to recover in fiscal year 2024, mainly due to the recovery of PC in the second half of the year and the acceleration of AI PC in 2024. Citic Securities Research News believes that the replacement cycle, Windows10 stop updating, AI PC and other trends are expected to drive demand, Lenovo Group income month-on-month recovery trend will continue. At the same time, with the end of inventory deregulation, the pressure on the price side of PC is expected to ease significantly, and the contribution of cost reduction to gross profit will continue to appear.

Everbright Securities said that Lenovo is expected to achieve a month-on-month rebound in PC shipments in the third quarter of this year, and is expected to achieve positive year-on-year growth in the fourth quarter from a low base in the same period last year. In addition, Lenovo Group has recently released a number of PC products with AI processors, including the Yoga Air 14speople ThinkPad P16v, P16s and P14sJournal 2024 is expected to release PC products with edge-side AI reasoning capabilities, further stimulating the demand for replacement.

However, it should be noted that IDC also pointed out that the current PC industry still faces challenges, including the lengthening of the consumer market renewal cycle and the reduction of purchasing budgets by enterprises, so IDC expects PC shipments to fall 13.7% to 252 million units in 2023 compared with the same period last year. In view of the current industry downward cycle, only by increasing R & D and innovation and introducing attractive products and services can enterprises go through the cycle and wait for the flowers to blossom.

As the world's largest supplier of computer equipment, Lenovo Group, based on the new IT technology architecture covering all elements of "end-edge-cloud-network-intelligence", continues to increase product innovation and upgrading, and constantly consolidate its position as the leader in the global PC market. On the one hand, Lenovo Group promotes the intelligent innovation experience of its products and constantly brings forth new and innovative PC devices, such as the Legion 9i game notebook recently launched on IFA, which is the world's first 16-inch game laptop with a liquid cooling system, redefines the luxury configuration of game notebook computers, and is the latest peak of Lenovo game laptop innovation.

On the other hand, Lenovo Group uses AI and computing as the "anchor" technology to actively promote the landing of a new generation of AI PC. Driven by the wave of AI, PC's AI auxiliary tools are also reshaping the productivity of individuals and enterprises, and major enterprises are also laying out or developing AI engine PC or AI PC products as an important strategic direction. Bo Wenxi, chief economist of IPG China and vice chairman of China Enterprise Capital Alliance, once said in an interview that the development of AI technology has brought new opportunities to the PC industry. In the future, the PC industry will strengthen the combination with AI and launch smarter and more personalized products to meet the needs of users for intelligent office and entertainment.

Lenovo Group began to layout AI notebook computers as early as five years ago. Starting from the first generation of super-intelligent computer Yoga S940, Lenovo Group has expanded to a variety of mid-and high-end products, all of which have strong AI acceleration capabilities. It is reported that Lenovo will release the latest Intel-based AI PC as soon as this autumn.

In addition, based on the development of AI computing power, Lenovo Group is also committed to promoting the change of personal computing. Wang Chuandong, vice president of Lenovo Group and chief marketing officer in China, said at the trade fair that Lenovo will release AI PC with AI accelerated computing power, and use AI technology to embed more AI capabilities in performance tuning, multimodal interactive experience, end-side cloud computing power scheduling and cross-terminal collaboration to build smarter terminals and more innovative experiences.

In the case of PC business rebounding with the recovery trend of the industry, IDG smart device business, the largest business of Lenovo Group, is also expected to bottom out and rebound. Lenovo's IDG smart device business consists of PC, tablet computers, smartphones and other smart device businesses. in addition to the positive trend of PC business, its smartphone business is also very competitive. According to the 2023Q2 global folding screen phone shipment report released by Tech Insights, Lenovo's Motorola's latest moto razr 40 series phones performed well, with a rapid growth rate of 2135% in the second quarter. The market share ranks fifth in the world.

Lenovo Group's IDG smart device business is also based on the "Tianxi" ecology, expanding products from neighboring areas of PC, such as smart home, smart entertainment, smart office, smart learning, intelligent health and other smart devices. Under the new IT architecture, these smart devices can achieve interconnection, active services, combination of virtual and real, and open sharing. With a rich full-scene product matrix, Lenovo's IDG smart device business can meet the needs of diversified users, which will help to further promote its overall business.

On the whole, under the prospect of the recovery of the smart hardware market, Lenovo's PC business and the overall IDG smart device business will benefit first by virtue of their leading position in the industry, with great potential for future growth. As the world's leading ICT technology enterprise and smart device leader, Lenovo will continue to embrace scientific and technological innovation, enhance the competitiveness of products, and create a smarter future for consumers with better products and services.

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