S&P moves Lenovo view to positive

S&P said it revised Lenovo Group Ltd.’s outlook to positive from stable and affirmed the BBB- ratings on the company and its senior unsecured notes.

“The positive outlook reflects Lenovo's rising contribution from service revenue and deleveraging prospects. We expect an increase in contribution from service revenue will bolster the company's profitability and resilience to business cycles. Lenovo is therefore likely to deleverage, with the debt-to-EBITDA ratio falling to less than 1x for fiscal 2022 (year ending March 31, 2022) and below 0.5x for fiscal 2023,” S&P said in a press release.

The agency said it forecasts Lenovo will boost its EBITDA by more than 10% for fiscal 2022 and by more than 5% in fiscal 2023. This forecast assumes Lenovo can expand the revenue contribution from software and service.

S&P said it could raise Lenovo’s ratings if it can sustainably grow its service revenue contribution and lower its debt-to-EBITDA ratio to below 1x over the next 12-24 months.

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