Lenovo Group Making a Comeback

I've been curious lately about Lenovo Group (LNVGY.PK). Lenovo’s net profits for year-ended March 2007 came to US$161 million; that amount was well above most analysts expectations, though part of it came from a US$12 million reversal in prior restructuring charges. Margins also impressed across all geographical segments, with EBIT margins at 5.9% from its China business, which was at 4.8% a year ago. Overseas operations also showed encouraging results, with EBIT also increasing to 1.6% from -0.3% in the Americas, and 2.5% from 1.6% in Europe, Middle East and African operations.

With these impressive results, Lenovo is making a comeback, and I'm expecting the company to post solid revenue growths this year, explained by higher PC shipments triggered by the launch of Microsoft’s (MSFT) Vista operating system. Couple this together with lower component costs, and they should improve on margins even further. For 2008, a reasonable forecast would be revenues in between US$15,550 to US$15,600 million and earnings of US$250 to US$260 million.

LNVGY 1-yr chart