Lyon has issued a research report stating that considering CHINASOFT INT'L's (00354) current valuation is not cheap, the firm has downgraded its rating from "High Conviction Outperform" to "Outperform", while raising 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 only by the end of this year to next year, therefore reducing its 2025 revenue growth forecast from 10% to a year-on-year growth of 7.6%, reflecting the delayed revenue contribution from its virtual machine products.

The firm stated that CHINASOFT INT'L's long-term development trend remains unchanged, expecting that the launch of Huawei HarmonyOS personal computers will drive the virtual machine business to become this year's development focus. However, the new growth drivers need time to materialize, and the virtual machine business is expected to take longer to contribute to revenue.

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