What signal does Yang Yuanqing, the helmsman, send by increasing investment in LENOVO GROUP?

Recently, Lenovo Group (00992) announced that on May 29, 2024, it proposed the issuance of warrants. The Board of Directors approved the proposal to issue 11.5 billion warrants at a subscription price of HKD 1.43 per warrant as part of a strategic business transaction. Further details will be disclosed.

Chairman, CEO, and Executive Director Yang Yuanqing, as the initial subscriber of the warrants, entered into a subscription agreement on the same day. Yang Yuanqing agreed to subscribe for 2.2 billion warrants, representing approximately 19.13% of the total number of warrants to be issued. The remaining 9.3 billion warrants will be privately placed to third-party investors and certain members of the company's management (which may include related parties at the subsidiary level).

Yang Yuanqing, the helm of Lenovo Group, remains optimistic about the company's future development. Over the past few years, he has increased his holdings in the company multiple times. According to disclosures, on June 3 of this year, Yang Yuanqing increased his holdings by 16.6115 million shares, raising his ownership to 7.72%. On July 15, his ownership increased to 12.15%. His participation in the subscription of warrants this time fully demonstrates his approval of this transaction and confidence in the future prospects.

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In fact, Yang Yuanqing has led Lenovo Group through multiple transformations at different time periods, enabling the company to transcend history and maintain vitality. For example, under the 3S strategic transformation and the policy guidance of intelligent manufacturing, the company has successively completed the restructuring of three major businesses including SSG Group, ISG Group, and SSG Group, building Lenovo's three growth curves. In 2023, the year AI entered a development phase, his leadership team upgraded the 3S strategy, fully AI-izing the business, with AI PCs becoming the iconic product of the AI era, ushering in a golden decade for future AI advancements.

AI Leader, Stable Business Growth

In May, Lenovo Group released its 2024 fiscal year Q4 financial report. The three major businesses, IDG, ISG, and SSG, all achieved quarterly growth, with Q4 revenue growth of 6.8%, 15.14%, and 10.37% respectively. Revenue contributions were 70.62%, 17.08%, and 12.28% respectively. Of note, IDG's core product is PCs. Under the AI strategy, its AI PC products have been well received in the market, stimulating replacement demand and market potential, driving IDG's recovery and growth.

According to the latest data from IDC on the global PC market, global PC shipments reached 64.9 million units in Q2 2024, a 3% year-on-year increase. Lenovo Group's growth rate exceeded the industry average and maintained its first place with a market share of 22.7%; Canalys data also shows that the global desktop and laptop computer shipments increased by 3.4% year-on-year, with Lenovo outperforming the market and reaching a market share of 23.4%, maintaining its position as the world's number one. Lenovo Group has been able to maintain its global leadership position in the PC industry for 10 years, not only relying on scale but also on correct decision-making by its leadership and investment in research and development to build product strength.

In 2024, Lenovo Group established itself as a leader in the new species field of AI PCs, defining the five key features of true AI PCs ahead of others. In May, it launched multiple products, with the Lenovo Yoga Book 9i AI Yuanqi Edition being recognized as one of the highlights at the 2024 World Artificial Intelligence Conference. In June, the company once again released several innovative AI terminal products, including the globally acclaimed YOGA Air 14s Snapdragon AI Yuanqi based on the Qualcomm Snapdragon X Elite platform, as well as the YOGA Air 14c AI Yuanqi and Legion Y9000P AI Yuanqi, three AI PC products.

In addition to PCs, the company continues to strengthen its other products, benefiting from ISG and SSG drives, as well as the comprehensive AI transformation of its business. In the fourth quarter of the 2024 fiscal year, non-PC revenue accounted for a historical high of 45%. Many of the company's products lead the global market in terms of technology and market share. For example, in servers, according to IDC data, in Q1 of 2024, Lenovo servers ranked among the top three in the Chinese market, with growth significantly outpacing the market average.

All of Lenovo Group's businesses are developing positively, with a comprehensive deployment of hybrid AI, covering computational power and intelligent hardware. It has become a major participant in the new quality productivity transformation under the AI revolution. With large-scale models on one hand and intelligent bodies on the other, the company is expected to continue increasing the penetration of AI in its own business and across the industry, driving sustainable and stable growth in performance.

Bullish Views from Investment Banks, Maintaining Momentum

Yang Yuanqing is a key figure in Lenovo Group, deeply understanding the company's development and providing substantial support for its growth, playing a significant role in guiding the market. BlackRock, Inc. has also increased its holdings in the company multiple times, with a position increase of 21.8251 million shares on May 29, raising its ownership to 5.09%. Most of the holders of Lenovo are strategic investors who benefit from market value premiums and dividend income through long-term holdings.

On May 28, the company announced a strategic cooperation framework agreement with Alat (a wholly-owned subsidiary of PIF), issuing $2 billion in interest-free convertible bonds due in three years to Alat. PIF is one of the largest and most influential sovereign wealth funds globally, known for its stringent investment project selection. This partnership demonstrates Lenovo's solid strength, gaining external recognition. Additionally, in the business market, the growth potential in the Middle East and Africa regions is expected to further unfold Of course, LENOVO GROUP has a strong financial strength. On July 16th, the international rating agency Moody's confirmed LENOVO GROUP's Baa2 issuer rating and senior unsecured rating, with a stable outlook. Moody's stated in the rating report that LENOVO GROUP's Baa2 issuer rating reflects the company's deep operational experience and diversified business growth model. In addition to Moody's rating, LENOVO GROUP currently also holds a "BBB" rating from Fitch, with a stable outlook; and a "BBB" rating from Standard & Poor's Global Ratings, with a stable outlook. LENOVO also consistently maintains the highest rating in the MSCI ESG global rating.

LENOVO GROUP is also favored by major investment banks. For example, according to recent investment bank research reports, Morgan Stanley reported that LENOVO GROUP's performance in Q4 of the 2024 fiscal year exceeded expectations, and raised profit forecasts for the 2025 and 2026 fiscal years by 3% and 8% respectively to reflect strong prospects for PCs and servers. Anxin's report stated that LENOVO's Intelligent Devices Group showed strong recovery momentum in the second half of the fiscal year, emphasizing that AIPC is a major turning point in the PC industry, driving an attractive new product cycle for users.

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Even the U.S. independent rating agency Zacks report stated that stocks with the best growth potential can outperform the market, and LENOVO GROUP is an incredible growth stock, receiving a "strong buy" rating. According to Eastern Choice data, domestic securities firms have an average target price for LENOVO of over 13 Hong Kong dollars, with China Everbright correctly giving a target price of 14.7 Hong Kong dollars, while the current price is 10.74 Hong Kong dollars, exceeding by 40.4%.

In the capital market, LENOVO GROUP's market value has been on a long-term bullish trend, with a market value increase of over 3 times since 2017, far outperforming the broader market and sector, solidifying its position as a long-term bullish stock. So far this year, the company's senior management and shareholders have increased their holdings multiple times, with frequent strategic AI initiatives in business, and intensive positive outlook from investment banks. With clear signals of growth, driven by performance, the company's market value is expected to reach new heights in the upward trend