Recently, Nomura Securities issued a research report upgrading LENOVO GROUP (00992) to a Buy rating with a target price raised to HK$14, representing a 38% upside potential from current stock price levels.

Nomura Securities outlined several reasons for the rating upgrade in its research report. The firm noted that Lenovo's stock has been in a consolidation phase over the past six months, presenting a favorable buying opportunity. Additionally, the potential resumption of NVIDIA H20 server shipments to Chinese customers, the planned launch of RTX Pro in China by the end of fiscal year 2026, and expectations that Lenovo will capture more Chinese AI server business provide positive catalysts. Strong international generic server demand and PC market share growth also offer support.

The valuation is based on a 12x price-to-earnings ratio applied to fiscal year 2026 earnings per share of $0.15, compared to the previous target based on 12x P/E on fiscal year 2026 EPS of $0.14. The stock currently trades at 8.6x fiscal year 2026 expected earnings per share.

Nomura believes that April-June quarter results may exceed expectations, benefiting from strong generic server demand and PC market share gains. This is primarily driven by capital expenditure shifts from AI servers to generic servers among leading clients, including international hyperscale companies and Chinese internet firms, boosting server revenue growth.

In the PC business segment, Lenovo has captured additional market share in the US and EU markets from competitors such as Dell and HP, which should contribute to overall sales and profit momentum in the April-June period.

Looking ahead to 2026, Nomura expects Lenovo to benefit from Microsoft's rising demand over recent quarters. The resumption of H20 server shipments is anticipated to generate additional revenue in the December quarter.

On the other hand, while PC upstream supply chain pre-buying occurred in the first half of 2025, this has limited impact on downstream brand PC shipment forecasts for the remainder of the year, with Lenovo expected to continue gaining market share.