Key Takeaways:
- CLSA reiterates Lenovo as top pick in China tech with a HKD36 target price.
- SMCI's 15%-17% gross margin beat confirms strong AI server demand and pricing power.
- Lenovo's server margin may expand to 5.2% in fiscal Q1 2027 from 3.6%.
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CLSA names Lenovo top pick with HKD36 target on AI server margins
CLSA reiterated Lenovo Group as its top pick in China's technology sector with a HKD36 target price, citing AI server margin expansion.
"Super Micro's preliminary gross margin of 15 percent to 17 percent for the fourth fiscal quarter confirms that strong AI server demand and tight GPU supply are enabling pricing power," CLSA analysts wrote in a research report.
The broker expects Lenovo's server business margin to expand to 5.2 percent in the quarter ending June, from 3.6 percent in the quarter ended March, with further improvement anticipated. CLSA maintained its outperform rating and HKD36 target price, which implies significant upside from current levels.
The SMCI margin beat signals that server makers with secured component supply can command better pricing and product mix. CLSA sees room for upward earnings revisions and a potential re-rating for Lenovo as its AI server business drives the next stage of growth.
CLSA's call comes after Super Micro Computer reported preliminary Q4 fiscal 2026 gross margin of 15 percent to 17 percent, above its previous guidance. The improvement reflected optimization in customer and product mix, driven by sustained tight supply of key AI components including GPUs, CPUs and memory, according to the report.
The broker said the trend will also benefit Lenovo's server business. UBS recently raised its target price on Lenovo to HKD26, citing strong infrastructure business momentum that offsets a slowdown in devices.
Lenovo shares traded lower by 2.4 percent on Thursday, with short selling volume of HKD612.3 million representing 20.5 percent of turnover, exchange data show.
The CLSA endorsement signals that Lenovo's AI server business is entering a margin expansion phase that could drive earnings upgrades. Investors will watch Lenovo's fiscal first-quarter results due in August for evidence of the margin trajectory CLSA projects.
This article is for informational purposes only and does not constitute investment advice.
[1] ＜Research＞ CLSA Reiterates LENOVO GROUP (00992.HK) as Top Pick in China Tech Sector; Super Micro Computer, Inc. (SMCI.US) Results Confirm Strong AI Server Demand and Margin Performance[2] Super Micro Computer: The Margin Shock Matters (Rating Downgrade)[3] Super Micro Computer stock surges 20% on margin recovery[4] At Last, Some Good News for Super Micro Stock[5] Super Micro: The AI Boom Is Coming Back Home (Upgrade) - Seeking Alpha
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