Highlights

• We expect 2QFY27 non-IFRS net profit to grow 88% yoy to US$1,226m, primarily driven by robust 120% yoy revenue growth in the ISG business, and a resilient 11.0% yoy revenue growth in the IDG business.
   
• The non-cash fair value loss from the warrant issued alongside the ALAT CB is estimated to be US$1.9b. This will push reported net profit to a US$680m loss.
   
• Maintain BUY and target price of HK$49.00.
   

Analysis

• We are expecting strong print across the board. We expect 2QFY27 revenue of US$27,268m, +33.3% yoy and +1.2% qoq, adjusted operating margin of 6.7%, +3.0ppt yoy and +1.0ppt qoq, and core operating profit of US$1,827m, +20.0% yoy and 6.4% qoq. With Lenovo’s share price surging from HK$23.02 to HK$34.54 during the quarter, we are estimating a US$1.9b non-cash fair value loss due to its warrant issued along with the ALAT convertible bonds which have an adjusted strike price of HK$11.92. This will push reported net profit to a US$680m loss (vs 2Q26 profit at US$340m). Stripping that off, non-IFRS net profit is expected to surge 88.0% yoy and 14.0% qoq to US$1,226m.