As the mobile phone industry has fallen into a well-known growth bottleneck, going overseas has become the most powerful lever for major mobile phone manufacturers to support the "incremental" part.
According to the "Global Smartphone Shipment Data for the First Quarter of 2024" released by Canalys, a recent market research agency, global smartphone shipments increased by 11% year-on-year - Xiaomi and Transsion, the "king of African mobile phones", sat in the third and fourth positions in the world respectively.
According to the report, Xiaomi's global shipments last year were about 146 million units, of which more than 100 million units entered the overseas market. Transsion's shipments are almost all overseas, with 94.9 million units, only slightly lower than Xiaomi.
However, if calculated in terms of gross profit, Transsion has won about 60% of the gross profit of Xiaomi mobile phones with about one-third of the revenue of Xiaomi's mobile phone business - achieving such results, Transsion has once again attracted the attention of the market.
On April 22 and April 24, Transsion Holdings successively released its 2023 annual report and 2024 first quarter financial report. According to the annual report, in 2023, Transsion will achieve revenue of 62.295 billion yuan, a year-on-year increase of 33.69%, and the net profit attributable to the owners of the parent company will reach 5.537 billion yuan, an increase of 122.93% over the same period of the previous year.
The continuous growth in the past few quarters is due to Transsion's extreme cost performance on the one hand, and on the other hand, it is also due to the fact that Transsion is constantly going out of Africa and continuing to conquer emerging markets such as South Asia, Latin America, and the Middle East.
Zhu Jiatao, a senior analyst at Canalys, told "City Boundary" that in the low-end market, Transsion's product hardware configuration is relatively good, and there is even a certain generation gap with its competitors. Consumers in emerging markets are not very sticky and belong to the price-sensitive group, and Transsion has captured many users with its cost performance.
At the same time as the performance soared, Transsion made a large dividend. According to the financial report, the company's annual cash dividends in 2023 will total about 4.839 billion yuan, accounting for 87.40% of the company's net profit attributable to the parent company in 2023, almost dividing the company's net profit.
However, under the multiple good news, Transsion's share price suddenly fell sharply on April 25, closing at -10.88%, with a market value of 14.3 billion yuan evaporated, and the current market value is 117.1 billion. Has the performance of this star company reached an inflection point?
01. A mobile phone only earns 28.5 yuan
In the first quarter of this year, Transsion's share of mobile phones continued to grow again. According to IDC data, Transsion is currently the fastest growing among the world's top five mobile phone manufacturers. In the first quarter of 2024, shipments grew by 84.9%, with 28.5 million smartphones sold and a market share of 9.9%.
When it comes to the brand Transsion, because it is mainly engaged in overseas markets, there were not many users who were familiar with it in China a year or two ago. It was not until recent months that Transsion's performance exploded and its stock price soared, and it was widely concerned by the market.
However, in the mobile phone industry, many people in the industry have already noticed Transsion. At the beginning, it chose the African market, which other manufacturers look down on, as its base camp, and once achieved a market share of more than 50%, and was crowned the title of "the king of African mobile phones".
As the founder of Transsion, Zhu Zhaojiang was the management of Bird Mobile in the early days, and later left to start his own business. Today, the entire management of Transsion is still dominated by the "waveguide" system. According to the information on Transsion's official website, there are currently nine members of the board of directors of Transsion Holdings, in addition to three independent directors, Chairman Zhu Zhaojiang and five other directors all worked in Bird Mobile that year.
One of the major advantages of Transsion in the African market is that the price is low enough and the cost advantage is relatively large.
According to the financial report, Transsion will sell 194 million mobile phones worldwide in 2023, ranking third in the world, with a market share of 14%. In the smartphone market, IDC data shows that Transsion will ship about 95 million smartphones in 2023, with a market share of 8.1%, ranking fifth in the world.
In other words, at present, more than 50% of Transsion's shipments are feature phones, and smart phones account for less than half of its shipments. The data shows that the main force of Transsion's shipments is still models below 200 US dollars, although the gross profit margin is good, but the profit of a single machine is not high.
Previously, Alpha Factory disclosed in a report that the average sales unit price (ASP) of Transsion mobile phones was only more than 500 yuan.
According to the calculation of "City Boundary", in terms of net profit, Transsion will sell 156 million mobile phones in 2022, with a net profit of 2.484 billion yuan, and a mobile phone will only earn a net profit of about 16 yuan. In 2023, Transsion sold 194 million mobile phones, doubling its net profit to 5.537 billion yuan, and earning a net profit of about 28.5 yuan per mobile phone, but it is still a small profit but quick turnover.
However, thanks to the cost advantage, Transsion's gross profit margin is not low, and it is even much higher than that of some of its competitors.
In terms of the gross profit of the mobile phone business, Transsion's mobile phone business revenue in 2023 will be 57.348 billion yuan, with a gross profit margin of 24.18%, and the gross profit of the mobile phone business will be 13.867 billion yuan. In comparison with Xiaomi Group, Xiaomi's mobile phone business revenue in 2023 will be 157.46 billion yuan, with a gross profit margin of 14.6%, and a gross profit of 22.989 billion yuan.
In other words, Transsion's mobile phone business generated more than half (60.3%) of Xiaomi's mobile phone business with about one-third (36.4%) of Xiaomi's mobile phone business's revenue. Of course, Xiaomi's current business is relatively diversified, with other businesses with higher gross margins such as Internet services, IoT and finance, while Transsion's revenue structure is relatively simple.
02, the secret of the king of Africa
According to Transsion's first quarterly report, its growth rate continues to maintain a high level. In the first quarter of 2024, the company achieved revenue of approximately RMB17.443 billion, an increase of 88.1% year-on-year, and net profit attributable to shareholders of listed companies reached RMB1.626 billion, an increase of 210.3% year-on-year. As a comparison, Transsion Holdings' net profit in 2022 will only be 2.484 billion yuan.
From Africa to South Asia, from Southeast Asia to Latin America, why is Transsion reaping dividends in this round of market growth? This has a certain relationship with Transsion's production cost advantage.
Compared with other manufacturers, Transsion mainly takes the cost-effective route, and its investment in R&D and brand is significantly less pressure than that of other manufacturers. In 2023, Transsion Holdings' R&D expenses will be 2.256 billion yuan, accounting for only 3.6% of revenue. The R&D expenses of Xiaomi Group were 19.098 billion yuan, accounting for 7% of revenue.
"Transsion's apportionment costs in R&D, branding and procurement will be much smaller, so it does have certain advantages in terms of overall costs. Zhu Jiatao said.
On the other hand, Transsion's self-built factory and localized production model are also conducive to cost control.
According to Transsion's financial report, Transsion adopts a sales-based production model, which includes its own factories, outsourcing factories and ODM manufacturers. After years of deep cultivation in the African and South Asian markets, TRANSSION has established localized factories in both regions.
In addition, Transsion said that the company's production, R&D, procurement and sales all include foreign and local employees, and adhere to a global vision and local innovation concept. For example, for the African market, Transsion has developed technologies that meet the needs of the local market, such as low-cost high-voltage fast charging, ultra-long standby, ambient current detection, and anti-perspiration USB interface.
Transsion's experience in the fragmented market has also become the key to its recent growth.
According to Canalys analyst Zhu Jiatao, Transsion, which started in Africa, is better at fragmenting the market. At present, the markets in Latin America, the Middle East, Southeast Asia and other markets developed by Transsion are also relatively fragmented, and the parallel goods and gray trade markets are relatively developed.
According to IDC data, Transsion will have a market share of more than 40% in the smartphone market in Africa in 2023, ranking first. In addition, South Asia is also a strong region for Transsion, with Transsion ranking first in the smartphone market in Pakistan and Bangladesh with a market share of more than 40% and 30% respectively, and ranking sixth in the Indian market with a market share of 8.2%.
At the same time, Transsion is also exploring the high-end market and launching folding screen products, and the average selling price is also increasing. Transsion said in its financial report that the company has developed technologies and products such as folding screen mobile phones, scroll screen concept mobile phones, explorer satellite communications, and air charging, and is constantly moving towards the mid-to-high-end market.
According to the annual report, Transsion Holdings' gross profit margin in the African market will reach 30.97% in 2023, an increase of 3.34% year-on-year. The gross profit margin in other markets such as Asia was 21.11%, a year-on-year increase of 4.86%.
The gross profit data also fully proves that Transsion is doing better in the middle and high-end markets in Africa, which is considered to be a "low-end market", and the gross profit margin is significantly higher than that of other regions.
In this regard, Zhu Jiatao told "City Boundary" that because of its deep cultivation in Africa for many years, Transsion has an advantage in African brands. In addition, it also covers a relatively comprehensive APP and software ecosystem in the local area, which can help Transsion sell better average prices.
03. Why does the stock price fall instead of rising?
In 2019, Transsion was listed on the Science and Technology Innovation Board, and in four years, its total operating income has increased from 25.346 billion yuan to more than 60 billion yuan now, with a compound annual growth rate of more than 30%, making it a leader in the entire A-share market.
According to Canalys data, global smartphone shipments in the first quarter of 2024 increased by 11% year-on-year. According to IDC's research report, global smartphone shipments in the first quarter of 2024 increased by 7.8% year-on-year to 289.4 million units. Transsion ranked fourth in the world in terms of shipments during the quarter, with an 84.9% increase in shipments.
However, after Transsion handed over two impressive financial reports in a row and paid large dividends, its stock price fell instead of rising. As of the close of trading on April 25, Transsion's share price fell 10.88%, with the stock price falling to 145.18 yuan from a high of 179.17 yuan a week ago.
The market believes that this may be related to the early release of Transsion's positive performance. Since December 2023, Transsion's share price has risen for several months, from a low of 109.68 yuan to a high a week ago. Now that the benefits are exhausted, the market has some doubts about its further growth.
Zhu Jiatao said that judging from the financial report, the rapid year-on-year growth rate in the first quarter of this year is also related to the fact that in the first quarter of 2023, Transsion mainly cleared inventory, did not have high shipments, and had a small base. However, in the second quarter of 2023, Transsion's base has risen, especially in the second half of the year, which is growing rapidly, so it may be difficult for Transsion to continue to maintain rapid growth in the next financial report.
"Now Transsion's cost advantage is also being challenged, on the one hand, the price of parts in the mobile phone industry has risen, which has increased the cost of the whole machine. On the other hand, Transsion already has a relatively high market share in many areas, and in the future, more investment will be made in brands and teams, which will also push up costs. ”
A Transsion employee working in Southeast Asia told City Boundary that most of Transsion's mobile phones are only about 1,000 yuan when converted into RMB, and the folding screen they sell most expensive at present is only about 4,000 yuan when converted into RMB. At the same price, you can basically only buy entry-level flagship phones in China, and the price of most brands of folding screen mobile phones is more than 6000 yuan.
According to IDC data, as of the third quarter of 2023, the average price of China's mobile phone market has reached 3,480 yuan, and the value of the high-end market has been further highlighted. Transsion is also facing certain growth pressure in the future.
In addition, while the performance soared, Transsion also issued excess year-end bonuses to employees, and at the same time paid large dividends to shareholders.
Not long ago, "City Boundary" mentioned in a report on Transsion that at the end of 2023, Transsion issued a notice to employees: the company's performance coefficient is 1.3, that is, all employees will receive an additional 30% year-end bonus on the basis of the normal accounting year-end bonus.
Just a few days ago, Transsion announced that it intends to distribute a cash dividend of 30.00 yuan (tax included) to all shareholders for every 10 shares, with a total cash dividend of about 2.42 billion yuan (tax included), accounting for 43.70% of the company's net profit attributable to the parent company in 2023.
Prior to this, Transsion Holdings had implemented equity distribution in the first three quarters of 2023, with cash dividends of about 2.420 billion yuan, so the company's annual cash dividends in 2023 totaled about 4.839 billion yuan, accounting for 87.40% of the company's net profit attributable to the parent company in 2023.
Such a large amount of dividends is also regarded as a "conscientious company" by many small and medium-sized shareholders. Recently, in the Xueqiu community after Transsion's stock price fell, many users said: The decline has nothing to do with performance, and the increase in the first two years is too big.
Author | Zeng Guang
Edit | Li Yuan
Operations | Liu Shan