Communication Holdings released 23 annual reports and 24 quarterly reports. Communication Holdings Q1 achieved revenue of about 17.443 billion yuan, an increase of 88.1% year on year; net profit to mother was about 1,626 billion yuan, up 210.3% year on year, and the net profit margin was 9.37%, up 3.72% year on year. The company continues to explore emerging markets, while benefiting from product structure upgrades and cost optimization, maintaining the company's competitive advantage in Africa and actively expanding emerging markets.
On the other hand, continue to expand the category business, continue to improve product strength, expand channel construction, and maintain a leading position.
Maintain Africa's position, actively expand emerging markets, and actively deploy AI phones. In 2023, the total number of voice phones shipped was about 194 million units. According to IDC statistics, in 2023, the company's share of the global mobile phone market was 14.0%, ranking third among global mobile phone brand manufacturers. Among them, smart phones had an 8.1% share of the global smart phone market, ranking fifth. In 2023, the company's share of the African smartphone market exceeded 40%, ranking first in Africa. The company will continue to promote localized operations and build core competitiveness. In the South Asian market, Pakistan's smart phone market share exceeds 40%, ranking first; Bangladesh's smart phone market share exceeds 30%, ranking first; India's smart phone market share is 8.2%, ranking sixth. The company actively lays out product technologies such as AIGC portrait photography and digital people to enhance the user experience.
Develop emerging markets and create a second growth curve. 1) Emerging markets: Emerging markets such as South Asia, Southeast Asia, the Middle East, and Latin America have a population base of more than 4 billion. The number of mobile phones per capita is small, and the market space is large.
At the same time, with the continuous development of emerging markets, the share of smartphones has increased, and there is a need for structural improvements.
2) New products: Launched digital accessories brand Oraimo and home appliance brand Syinix. Oraimo products include TWS Bluetooth headsets, smartwatches, Bluetooth speakers, power banks, vacuum cleaners, etc. Syinix launched the Swallow Maker automated staple food machine, which effectively solved the local people's eating pain points. 3) Mobile Internet: The company's mobile phone brands are all equipped with an operating system that is deeply customized based on the Android system to develop and incubate mobile Internet software; the enterprise data insight platform DataSparkle, the multi-cloud communication management platform TRANSSCMP, and the African media platform Sunnbird.
Focus on R&D investment and continue to create user value. Q1 R&D costs 589 million, yoy +10%. The company has deep insight and understanding of the African market and user groups, and has spent many years of R&D to solve customer pain points. A special beauty function for black people was released. The microphone irradiates eyes and teeth with infrared light to position the eyes and teeth, and activates the automatic light filling function and beauty function to take a fixed snapshot; in response to the problem of difficult charging, a product with a long battery life was launched; and a new recycled fiber material was developed to address the problem that users are prone to corrosion due to excessive sweating. The company uses a global perspective to deepen the construction of a consumer insight system, explore software experiences in localized scenarios, develop key technologies for smart voice assistants in small languages for specific groups of people, and continue to create differentiated local user value.
Profit forecast and investment advice: We expect the company to achieve operating income of 759.22/911.07/104.773 billion yuan in 2024/2025/2026, up 22%/20%/15% year on year, and achieve net profit of 65.24/78.34/9.048 billion yuan, up 18%/20%/15% year on year. The current stock price corresponds to 2024/2025/2026 PE of 20/17/15X respectively. As an excellent overseas mobile phone brand, the company still has plenty of room for growth in emerging markets in the future and maintains a “highly recommended” rating.
Risk warning: competition increases risk, market development falls short of expected risk, downstream demand falls short of expectations.