Nov. 2 (Bloomberg) -- Lenovo Group Ltd., the world's third-biggest maker of personal computers, climbed to a seven- year high in Hong Kong trading as Thinkpad laptop sales helped profit rise more than analysts estimated.

Lenovo advanced 2.2 percent to HK$8.74 at the close of trading on the Hong Kong stock exchange, the highest close since August 2000. The Hang Seng Index fell 3.3 percent. The stock has more than doubled this year.

Bear Stearns Cos., Citigroup Inc. and Credit Suisse Group analysts raised their price targets on Lenovo's stock after the company said yesterday profit almost tripled last quarter. Revenue climbed 20 percent to a record, helping the Raleigh, North Carolina-based company take market share from Dell Inc.

There are ``more improvements possible,'' Citigroup's Kirk Yang wrote in a report today. Yang, who described the profit increase as ``amazing,'' raised his target price on the stock by 20 percent to HK$12.

Bear Stearns analyst Jack Tse raised his target price by 23 percent, while Credit Suisse's Venugopal Garre increased the target price by 78 percent to HK$9.33. Wong Chi-man, an analyst at China Everbright Research Ltd., lifted his investment rating on Lenovo to ``accumulate'' from ``hold.''

Lenovo posted second-quarter net income of $105.3 million, beating the $72 million median estimate of five analysts surveyed by Bloomberg. Job cuts at the PC unit it acquired from International Business Machines Corp. and lower computer memory prices helped lift the operating margin to 2.7 percent, compared with 1.2 percent a year earlier.

No Worries

``If we continue with the performance we have now, we don't need to worry about any restructuring,'' Chief Executive Officer William Amelio said in an interview yesterday. Lenovo said in April it plans to cut 1,400 jobs as part of the Chinese company's efforts to integrate the former IBM unit. The move followed the reduction of 1,000 workers in 2006.

Lenovo derived most of its growth from China, Taiwan and Hong Kong, the company said yesterday. Sales in the so-called greater China region expanded 27 percent in the quarter, compared with 23 percent growth for the rest of Asia, 18 percent in Europe, Middle-east and Africa, and 11 percent in the Americas.

The company plans to step up growth outside China, its biggest market, by offering laptops to consumers in the U.S., France, Russia and South Africa starting January, Chairman Yang Yuanqing said in September.

``We believe consumer PCs present tremendous opportunities for Lenovo,'' Bear Stearns's Tse wrote in a report today.

Consumer PCs

Demand from consumers for PCs is growing three times faster than in the corporate market, Framingham, Massachusetts-based research company IDC said.

Lenovo had 8.2 percent share of global PC shipments in the quarter ended September, IDC said, compared with 7.7 percent a year earlier. The Chinese company's market share ranks behind only Hewlett-Packard Co.'s 19.6 percent and Dell's 15.2 percent, according to IDC.

Still, the stock fell as much as 6.8 percent in early trading on concern earnings failed to justify the doubling of the stock's price over the past five months.

Lenovo's shares now value the company at 27 times estimated earnings for next fiscal year, according to data compiled by Bloomberg. By comparison, Dell trades at 18 times, and Hewlett Packard 16 times.

``Lenovo is quite expensive, following recent gains,'' said Joseph Ho, who rates Lenovo shares ``hold'' with a price target of HK$7.19 at Daiwa Institute of Research in Hong Kong. ``We believe the value of the stock is unjustified based on its earnings.''

Dropping IBM

Lenovo's second-quarter result included a charge of $28 million from the company's decision to drop the IBM brand in its products, Chief Financial Officer Wong Wai Ming said yesterday.

The Chinese computer maker gained the right to use the IBM brand for five years as part of its acquisition of the U.S. company's PC unit in 2005. By voluntarily giving up the right early, Lenovo is required to write down the value of the asset, resulting in the charge, Wong said.

``When our customers see a Lenovo salesperson come in, they want to see Lenovo products follow,'' Amelio said. ``This is our company now, and it is important to make that change.''

To contact the reporters on this story: Mark Lee in Hong Kong at wlee37@bloomberg.net; Janet Ong in Beijing at jong3@bloomberg.net.

Last Updated: November 2, 2007 04:50 EDT