CHINASOFT INT'L (00354) dropped over 5%, declining 5.08% to HK$6.17 with turnover of HK$280 million at the time of writing. On the news front, China Software International plans to hold a board meeting on August 25 to consider and approve the company's interim results.

Lyon issued a research report stating that CHINASOFT INT'L's long-term development trend remains unchanged. The firm expects that the launch of Huawei's HarmonyOS personal computers will drive the virtual machine business to become this year's development focus. However, the new growth momentum needs time to materialize, and Lyon expects the virtual machine business will take longer to contribute revenue.

Benefiting from faster growth in high-margin businesses, Lyon expects ChinaSoft's gross margin to improve slightly this year. The firm currently forecasts first-half revenue and net profit to grow 10.5% and 10.1% year-on-year, respectively.

The firm noted that considering ChinaSoft's current valuation is not cheap, Lyon downgraded its rating from "High Conviction Outperform" to "Outperform" but raised the target price from HK$6.5 to HK$7.1. The firm expects large-scale procurement orders from government and state-owned enterprises for Huawei's new PCs to emerge by the end of this year to next year. Therefore, it lowered its 2025 revenue growth forecast from 10% to 7.6% year-on-year, reflecting the delayed revenue contribution from its virtual machine products.