Produced by Radar Finance and Economics, edited by Li Yihui, Deep Sea
Transsion Holdings, whose performance has increased significantly, has collapsed.
On April 25, Transsion Holdings' share price fell rapidly after the opening, closing at 145.18 yuan per share, down 10.88% in a single day, with a total market value of 117.1 billion yuan.
According to the first quarter report of 2024 disclosed by the company, the operating income during the reporting period was 17.443 billion yuan, a year-on-year increase of 88.10%, and the net profit attributable to the parent company was 1.626 billion yuan, a year-on-year increase of 210.30%.
In the face of this seemingly good performance and diverging stock price performance, some investors have been wrongly killed. In fact, the comparison can find that the company's high growth in the first quarter is due to the low base of the same period last year. If you look at it quarter-on-quarter, the company's revenue and net profit in the latest quarter are lower than in the fourth quarter of last year.
Another analysis pointed out that the gross profit margin of Transsion Holdings in the first quarter was 22.15%, down 1.21 percentage points year-on-year and 1.48 percentage points quarter-on-quarter, which may be another negative signal for investors with floating profits in stocks.
Transsion Holdings, known as the "King of Africa", is an alternative existence in the mobile phone industry. In the past decade, domestic mobile phone manufacturers have experienced many reshuffles, while Transsion, which avoids involution, is far away in emerging markets to "make a fortune". Zhu Zhaojiang, the founder of Transsion, also appears on the Hurun Global Rich List all year round, with a fortune of 16 billion yuan in 2024.
At present, in addition to the single mobile phone business, Transsion Holdings is also trying to diversify and explore. Just from the perspective of financial data, it remains to be tested whether the company's diversified layout can become a new growth point.
The "king of Africa" can still fight
After experiencing the trough of market demand in 2022, the mobile phone market will enter a recovery cycle in 2023, driving the performance growth of related companies.
According to statistics from market research agency IDC, global smartphone shipments reached 326 million units in the fourth quarter of 2023, a year-on-year increase of 8.5%, and a year-on-year recovery for the first time since the third quarter of 2021.
The recovery also includes Transsion Holdings' main position in the African market. According to a report by market research agency Canalys, the African smartphone market saw a significant recovery in the fourth quarter of 2023, with shipments reaching 19.2 million units, a year-on-year increase of 24%.
For the whole of 2023, smartphone shipments in the region reached 68.7 million units, up 6% from 2022, thanks to the boost in consumer confidence in the second half of 2023, the report noted.
Affected by this, Transsion Holdings will return to a positive growth track in 2023 after experiencing a decline in performance in 2022, but it will show an obvious trend of low before and then high.
According to the financial report, in 2023, the company will achieve operating income of 62.295 billion yuan, a year-on-year increase of 33.69%, and a net profit of 5.537 billion yuan, a year-on-year increase of 122.93%.
According to the financial report, the reasons for this performance are: the company's new market development strategy has achieved certain results, the overall shipment and sales revenue have increased, the company has improved the company's overall gross profit margin through product structure upgrading and cost optimization and other measures, and the corresponding gross profit has increased; the company has improved operational efficiency, while benefiting from the growth of scale, the company's expense ratio has decreased year-on-year.
In terms of profit-related indicators, the company's gross profit margin in 2023 will be 24.45%, up 3.13 percentage points year-on-year, and its net profit margin will be 8.97%, up 3.68 percentage points year-on-year.
Transsion Holdings is mainly engaged in the design, research and development, production, sales and brand operation of smart terminals with mobile phones as the core. The main products are mobile phones under the three major brands of TECNO, itel and Infinix, including feature phones and smartphones.
In 2023, the company's overall mobile phone shipments will be about 194 million units, a year-on-year increase of 24.23%. According to the company's mobile phone product operating income of 57.348 billion yuan, the company's average mobile phone price last year was only 295.6 yuan, including lower price feature phones and higher smartphones.
Due to the uneven economic development, emerging markets are still in the transition stage from feature phones to smart phones, and feature phones still occupy a certain market share. In 2023, the company's feature machine will achieve an operating income of 5.942 billion yuan.
At present, Transsion Holdings' sales areas are mainly concentrated in emerging markets such as Africa, South Asia, Southeast Asia, the Middle East and Latin America.
According to IDC statistics, the company's market share in the global mobile phone market will be 14.0% in 2023, ranking third among global mobile phone brand manufacturers, and the company's share of the African smartphone market will exceed 40% in the same period, ranking first in Africa.
At its peak, Transsion Holdings' market share in the African market reached 57%, ranking first in terms of sales. However, in recent years, although the company's dominance in the African mobile phone market has not wavered, its market share has been eroded, and the market share in the financial report has become "more than 40%".
Based on the above situation, Transsion Holdings has stepped out of the "base camp" in Africa and entered more emerging market countries. IDC data shows that in 2023, the company's Pakistan smartphone market share will exceed 40%, ranking first, Bangladesh's smartphone market share will exceed 30%, ranking first, and India's smartphone market share will be 8.2%, ranking sixth.
However, for Transsion Holdings, emerging markets are an important factor driving the growth of the company's smartphones, but they also inevitably attract many competitors to join, driving the market competition to become fierce.
In addition, in the current phase of aggressive expansion into new markets, companies are faced with the problem of sacrificing profit margins for market share gains. According to the financial report, the gross profit margin of the company in Asia and other regions in 2023 will be 21.11%, far lower than the 30.97% in Africa.
The stock price suffered a "death of the light"
In terms of giving back to shareholders, Transsion Holdings came up with a dividend package.
According to the annual report data, the company plans to distribute cash dividends of 2.42 billion yuan at the end of the year, plus the 2.42 billion yuan that has been distributed in the third quarter, and the annual dividend amount will reach 4.84 billion yuan, accounting for 87.40% of the net profit attributable to ordinary shareholders of listed companies in the company's 2023 consolidated statements.
Despite all the boldness, Transsion Holdings still seems to be struggling to satisfy investors.
Market data shows that since December last year, Transsion Holdings has rebounded strongly, with the highest rebound of 55%. However, starting from April 19, when the annual report was released, the company's stock price turned downward, falling by nearly 16% after five consecutive negative days.
All of a sudden, many investors expressed their puzzlement, and there were many theories circulating in the market about the reasons for the company's sell-off, such as good cash, profit taking, wrongful killing, and so on.
In this regard, Transsion Holdings responded to the media that the price changes in the secondary market were affected by multiple factors, and the company's operation is normal.
However, if you look at it only from a financial point of view, you may be able to find some clues. In terms of quarters, in the first quarter of last year, the company experienced a decline in revenue and profit, and only returned to a positive growth track in the second quarter.
From the third quarter of last year to the first quarter of this year, the company's single-quarter net profit doubled, with strong performance. Among them, in the first quarter of 2024, the company achieved operating income of 17.443 billion yuan, a year-on-year increase of 88.10%, net profit attributable to the parent company of 1.626 billion yuan, a year-on-year increase of 210.30%, and non-net profit of 1.354 billion yuan, a year-on-year increase of 342.59%.
However, if the low base in the first quarter of last year is not considered, compared with the data of the fourth quarter of last year, Transsion Holdings' revenue in the first quarter of 2024 decreased by 9.49% quarter-on-quarter, and net profit and net profit after deducting non-profits decreased by 1.6% and 16.68% quarter-on-quarter.
The company's staff replied to the Science and Technology Innovation Board Daily that the above-mentioned month-on-month decline is related to the industrial off-season in the first quarter and more domestic and foreign holidays.
Another point worth noting is that the gross profit margin of Transsion Holdings in the first quarter was 22.15%, down 1.21 percentage points year-on-year and 1.48 percentage points quarter-on-quarter.
In this regard, the company explained that the change in gross profit margin was mainly caused by the increase in the price of mobile phone supply chain devices in the first quarter of this year. Some industry insiders believe that in the case of the recovery of demand for smartphones, the price increase of storage products is expected to continue for a period of time, which may drag down the overall gross profit margin and profitability of mobile phone manufacturers.
In addition, it has been argued that the so-called "performance surge" may not be enough to support the company's share price, given the company's expansion in emerging markets and low gross margins outside of Africa, a combination of issues that work on investor confidence.
Africa has made tens of billions of dollars by selling mobile phones
The person who led Transsion Holdings to dominate the African market was the company's founder, Zhu Zhaojiang.
However, compared with the founders of other mobile phone brands in China, Zhu Zhaojiang seems quite mysterious, and there are not many interviews and reports related to him on the Internet.
According to public information, in 1973, Zhu Zhaojiang was born in Fenghua, Ningbo, Zhejiang Province. Since he was a child, Zhu Zhaojiang has been curious about the business world, and since he was in middle school, he has been thinking about running small businesses such as sweets, drinks, and watches.
In 1992, Zhu Zhaojiang was admitted to Nanchang Hangkong University to study mechatronic engineering. Four years later, after graduating from university, he joined Bird as a pager salesman, which had only been established for five years.
At that time, Bird started by making pagers, and later entered the mobile phone market, killing big brands such as Nokia, Motorola and Ericsson, ranking first in the domestic mobile phone sales list for 6 consecutive years.
In just three years, Zhu Zhaojiang has become the chief representative of Bird in North China. In 2003, he was appointed Executive Deputy General Manager of Bird Sales and has since expanded his international business.
The turning point also came at this time, when Zhu Zhaojiang discovered that the mobile phone market was almost a "blank slate" on the African continent. According to a study by RoyceFund, mobile phone penetration on the continent was only 6% around 2005.
In 2006, Zhu Zhaojiang resigned from Bird and founded Transsion Technology. In August of the same year, Transsion launched its first mobile phone in Africa. Based on the low level of local consumption and the incompatibility of operators, Transsion has successively launched "monster models" with dual SIM and dual standby, or even 4 SIM and 4 standby at extremely low prices.
Since then, Transsion has gained a firm foothold in this market by launching deeply localized products, such as black photo beautification, music players with amplifiers, and mobile phones with flashlights.
On September 30, 2019, Transsion Holdings was officially listed on the Science and Technology Innovation Board of the Shanghai Stock Exchange, and Zhu Zhaojiang's net worth also rose. This year, he was listed on the "Hurun Global Rich List" with a wealth of 16 billion yuan.
It is worth noting that in addition to selling mobile phones, Transsion Holdings is also trying to diversify and explore. According to the financial report, the company founded the digital accessories brand oraimo, the after-sales service brand Carlcare and the household appliance brand Syinix, etc., and independently developed HiOS, itelOS and XOS and other intelligent terminal operating systems and independent application software platforms.
Transsion Holdings said that with the help of the company's accumulation in the field of mobile phone products, the company's mobile Internet business and expanded categories of home appliances, digital accessories and other businesses have advantages in traffic and channels. Through word-of-mouth marketing and good interaction between users, the company's business ecological model of "mobile phone + mobile Internet service + home appliances and digital accessories" has taken shape.
This development path is the same as that of Xiaomi, which can make money both on hardware and advertising services. However, as of 2023, 92% of Transsion Holdings' revenue is generated by mobile phones, and the contribution of the remaining business is still small. Obviously, on the road to diversification, Transsion Holdings still needs to continue to explore.