Lenovo Results Continue Improving Trend

Lenovo's (0992) fiscal 3Q results likely won't blow anyone away but continue improving trend. Net profit was US$233 million vs net loss of US$289 million a year earlier, on back of 8% on-year rise in revenue to US$14.04 billion. I don't have consensus numbers but 9-month net profit of US$478 million already exceeds Guotai Junan's FY19 (ending March 2019) bottom-line forecast of US$472 million. Gross margin increased by 1.1 ppt on-year to 14.6%, which company says was due largely to the solid margin expansion in PCSD business and better product mix in Mobile business.

For the bread-and-butter PC business, Lenovo says it's important to note the successful gain of market share in premium and high-growth and commercial segments. Lenovo now boasts record high market share of 24.6% in global PC market and was the fastest growing PC vendor among top 5, according to preliminary industry data.

Mobile business reported a pre-tax profit for the first time since the Motorola acquisition. Data center business remains loss-making although losses narrowed year-on-year.

Overall, share prices may react positively and take another crack at HK$6.00. Lenovo is currently one of my top 3 holdings.