2012-11-27农银国际证券--Lenovo (992 HK):Buy
Key takeaways from the management meeting of LenovoWe attended Lenovo’s management meeting and discussed with itsEMEA CFO Mr. Jammi Tu. We reiterate our Buy on Lenovo as webelieve it will continue to gain market share of consumer PC segmentin the EMEA and the smartphone business will help the group achieve‘PC Plus’ strategy.The management shared with us the consumer business development andoutlook of the EMEA segment during the meeting. In the 2Q of FY03/13,the PC shipment grew by 40%YoY compared with 1% drop of overallmarket. The market share reached 10.8% in 2Q of FY03/13from 7.8% in1Q of FY03/13. The rapid growth was mainly generated by consumerbusiness and SMB. Due to acquisition of Medion, Lenovo has enhanced itsrelationship with the European channel distributors. The group has coveredmore than 80% of retail channels in Europe (vs 20% in 3quarters earlier).
The management is confident to grab more market share in consumerbusiness along with enhancement on the operating profit margin.
Regarding the smartphone business, the group will launch entry-to-midlevel smartphones in Russia and cooperate with local retailers to increasesales. Russia’s channels are dominated by local retailers rather than telecomoperators. The management hints that the gross profit margins ofsmartphones will surpass those of PCs and the group targets to become thetop 5 smartphone vendor in Russia within 3 years. We expect that thesmartphone business will help the group achieve ‘PC Plus’ strategy.
The latest IDC forecasts China PC shipment growth will recover to1-2%YoY in 4Q of 2012 compared with 2% drop in 3Q of 2012. Weestimate that Lenovo will continue to outperform the overall market by8-9% in 4Q due to its strong presence in emerging markets.
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