Event: The company released its 2023 annual report and 24Q1 quarterly report.
1) 2023: Revenue of 62.29 billion yuan, +33.7% year on year; net profit to mother of 5.54 billion yuan, +122.9% year on year; net profit after deducting non-return to mother of 5.13 billion yuan, +131.6% year on year. Gross profit margin 24.45%, +3.13pct year over year. Net operating cash flow was $11.89 billion, +500.7% YoY.
2) 23Q4: Revenue of 19.27 billion yuan, +82.4% year on month, +7.1% month on month; net profit to mother of 1.65 billion yuan, +632.3% year on month, -7.3% month on month; net profit without return to mother of 1.62 billion yuan, +827.7% year on month, -6.3% month on month. The gross profit margin was 23.6%, +1.77pct year over year, and -1.58pct month-on-month.
3) 24Q1: Revenue of 17.44 billion yuan, +88.1% year over month, -9.5% month on month; net profit to mother of 1.63 billion yuan, +210.3% year on month, -1.6% month on month; net profit without return to mother of 1.35 billion yuan, +342.6% year on month, -16.7% month on month. Gross profit margin 22.2%, -1.21pct yoy, -1.48pct month-on-month.
New markets have been successfully developed in 23 years, and revenue has grown substantially. In '23, the company achieved remarkable results in developing new markets such as Southeast Asia/Middle East/Latin America. The sharp increase in smartphone sales led to revenue growth. According to IDC statistics, 94.9 million smart phones were shipped in '23, +30.8% compared to the same period, making it one of the top five in the world for the first time. In addition, through product structure upgrades and cost optimization, the company's gross margin increased (+3.13pct year over year). Coupled with cost control and scale growth, the cost ratio also declined. The profit margin for 23 reached 8.97%, +3.68pct year on year, which in turn contributed to a significant increase in profit.
Brand advantage was consolidated, and 24Q1 maintained a high growth trend. The company is a leading domestic consumer electronics overseas brand. Its revenue mainly comes from overseas. Over the years, it has built a strong brand barrier based on localized innovation and product positioning focused on user experience, and has a high level of user loyalty. With the release of demographic dividends and a further increase in market share in overseas emerging markets, the company's smart phone sales continued to rise. According to IDC statistics, the 24Q1 smart phone shipped 28.5 million units, +84.9% over the same period last year, driving revenue and profits to remain high.
Released a new AIOS, leading the AI innovation experience for smart devices. At MWC 2024, TECNO, the company's brand, launched TECNO AIOS to gradually build an AI-driven smart device ecosystem. TECNO's personal AI assistant Ella supports multi-lingual intelligent interaction and provides efficient and personalized services to users around the world. Currently, it can complete AI functions such as real-time translation of phone calls, automatic generation of video subtitles, creative generation of wallpapers, images, and accurate photo searches with simple descriptions, and continuously explores the development possibilities of end-side AI.
Investment advice: According to the latest financial data, we have slightly adjusted our profit forecast. We expect the company to achieve net profit of 65/76/87 billion yuan in 2024-26 (previously equivalent to 65/7.5 billion yuan in 2024-25), corresponding to the PE valuation 20/18/15 times.
Risk warning events: terminal demand falls short of expectations; new market development falls short of expectations; risk that information used in research reports is not updated in a timely manner.