21st Century Business Herald reporter Luo Yiqi reported in Guangzhou
Benefiting from the development of the demographic dividend market, the "King of Africa" Transsion Holdings has still achieved a relatively high performance growth rate in 2021. But at the same time, the gross margin level shows a certain degree of volatility.
According to the financial report, in 2021, the company achieved operating income of 49.412 billion yuan, an increase of 30.75% year-on-year; net profit attributable to owners of the parent company after deducting non-recurring gains and losses of 3.112 billion yuan, an increase of 30.42% year-on-year.
The company explained that the reason for the revenue growth is that the company continued to increase investment in research and development during the year to enhance the terminal experience and product competitiveness of mobile phone users. At the same time, we will continue to increase the development of markets outside Africa, and on the basis of the continued growth of the African market, the sales revenue of markets outside Africa will rise higher than that of the same period last year.
However, at present, as TRANSSION continues to expand into emerging markets such as South Asia outside Africa, it has affected the company's comprehensive gross profit margin performance. The phased supply of superimposed 4G main chips is tight, and the performance of TRANSSION at the beginning of this year fluctuated.
Gross margin fluctuated
In 2021, TRANSSION Holdings achieved a gross profit margin of 21.4%, down 2.44 percentage points year-on-year, specifically from the product point of view, the business of the mobile phone segment showed that the company's overall gross profit margin was dragged down, down 3.04 percentage points year-on-year.
From the market point of view, based on its long-term development advantages in Africa, the company's overall gross profit margin has an upward effect, the gross profit margin level is 27.81%, but it fell by 1.18 percentage points year-on-year; and in other regions such as Asia, the company's gross profit margin is under pressure, the gross profit margin in these regions is 15.02%, far less than the advantage in Africa, and it continues to decline by 0.87 percentage points year-on-year.
According to wind data comprehensive statistics, observing the sales gross profit margin of TRANSSION Holdings from 2017 to 2021, it can be seen that its gross profit margin performance last year was at a relatively low point, and in 2018-2020, the gross profit margin level was between about 24% and 27%.
(Transsion's gross profit margin performance in the past five years, source: Wind)
Huaxin Securities analysis believes that due to the shortage of raw materials and rising prices, the company's gross profit margin fluctuates slightly. In 2021, the company will continue to deepen its cultivation in emerging markets such as Africa and South Asia to achieve iterative upgrading of product structure. Seek opportunities to expand the Middle East markets such as Iraq, Saudi Arabia and Turkey, as well as Latin American and Russian markets. The company is expected to reinvent its business path in Africa and further expand its market share in emerging markets.
From the perspective of the overall expansion speed, transsion holdings has performed well, and even seems to be in some emerging markets, bringing a sense of crisis to domestic head manufacturers.
According to the financial report, the company's overall mobile phone shipments in 2021 will be about 197 million units, and it will continue to cultivate emerging markets such as Africa and South Asia, do a thorough job in key value points, and upgrade and iterate its product structure. Among them, TRANSSION's market share in Africa continued to remain the first, and its leading edge was further expanded, while the South Asian market maintained a good operating trend.
According to IDC statistics, transsion will have a global mobile phone market share of 12.4% in 2021, ranking third; among them, smart phones have a global smart phone market share of 6.1%, ranking sixth; and the African smart phone market share exceeds 40%. In the South Asian market, Pakistan's smart phone market share of more than 40%, ranking first; Bangladesh smart phone market share of 20.1%, ranking second; India smart phone market share of 7.1%, ranking sixth.
Also attracting much attention is the business from the mobile Internet. For smartphones, this has always been a rich mine, and even Apple has placed more and more emphasis on the performance support brought by the software business.
According to the financial report, transsion's revenue from "other" categories other than "mobile phones" was 2.342 billion yuan, an increase of 112.3% year-on-year; the gross profit margin was as high as 41.37%, an increase of 4.23 percentage points.
According to reports, TRANSSION's mobile phone brands are equipped with intelligent terminal operating systems (OS) based on the secondary development and deep customization of the Android system platform, including HiOS, itelOS and XOS (collectively referred to as "TRANSSION OS"). Tool applications such as app stores, ad distribution platforms, and mobile phone butlers have been developed around this.
Based on user traffic and data resources, this is the core foundation for the company to develop mobile Internet products, through insight into local user needs, to create localized content, to create a sustainable profit model, combined with the company's mobile phone business, expand category business.
Performance was briefly disrupted by external factors
In the first quarter of 2022, transsion holdings performance declined. On the whole, this seems to be more due to the impact of external factors on the supply chain, as well as a certain degree of demand adjustment in the regional market.
This was a certain sign last year. Guojin Securities believes that according to IDC statistics, the shipment of smartphones in Africa in Q4 of 2021 fell by 7% year-on-year, which is consistent with the proportion of the company's African smartphone shipments falling by 7% year-on-year. Therefore, the weak demand for smartphones in Africa has dragged down the company's revenue to some extent.
According to the financial report, the company achieved operating income of 11.055 billion yuan in Q1 this year, down 1.75% year-on-year and 18.94% month-on-month; deducted non-attributable net profit of 711 million yuan, down 7.62% year-on-year and up 24.22% month-on-month.
(In the first quarter of this year, TRANSSION's revenue and net profit declined, specifically in the red characters.) Source: Wind)
Wind data shows that the gross profit margin of Q1 companies is 21.43%, and its gross margin level remains between 23% and 27% during the Q1 period of 2019-2021.
CITIC Securities analysis believes that in the first quarter of 2022, the 4G set was out of stock, and the external factors faced by some cities affected the production and export of mobile phones, but the company's performance remained stable.
The agency pointed out that the year-on-year decline in transsion gross profit margin is mainly due to the fact that from Q2 of 2021, logistics expenses will be adjusted from sales expenses to operating costs; since Q3 of 2021, the rebate expenses of dealers at the second level and below will be changed from including sales expenses to directly reducing operating income. The agency calculated that the company's gross profit margin after excluding two adjustments increased by about 1 percentage point year-on-year.
From the trend point of view, CITIC Securities believes that in the short term, with the adjustment of the category structure of the main chip demand side and the climb of new production capacity on the supply side, the shortage of global main chips is expected to gradually ease; and with the gradual recovery of local production and exports, it is expected that the company's smart phone sales are expected to achieve quarter-by-quarter growth.
In the long run, it is expected that the company's sales in the African market will maintain growth, and the proportion of total sales will continue to decline, India, Pakistan, Bangladesh market share tends to be stable, Southeast Asia, Russia, Latin America and other emerging markets are expected to gradually increase; it is expected that the medium and long-term transsion will cover a total of 4.7 billion people in Africa, the Middle East, Latin America, Eastern Europe and other markets, enjoying the long-term dividends of population growth in the target market and the switching and upgrading of functional machines to smart machines; at the same time, the company focuses on research and development into high-end smart machines. In the market outside Africa, the focus is on smart machines, and the product price has risen to 2,000 yuan, which is optimistic about the long-term structural improvement of the company's products.
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