Description of the event
Recently, Communication Holdings released the 2023 Annual Report and the 2024 First Quarter Report.
In 2023, the company achieved revenue of 62.295 billion yuan, up 33.69% year on year; net profit of 5.537 billion yuan, up 122.93% year on year; deducted non-net profit of 5.134 billion yuan, up 131.61% year on year; gross margin was 24.45%, up 3.13 pct year on year; net interest rate to mother was 8.89%, up 3.56 pct year on year; after deducting non-net interest rate of 8.24%, up 3.50 pct year on year.
2024Q1 achieved revenue of 17.443 billion yuan, up 88.10% year on year; net profit of 1,626 billion yuan, up 210.30% year on year; net profit after deducting non-net profit of 1,354 billion yuan, up 342.59% year on year; gross margin of 22.15%, down 1.21pct year on year; net interest rate of 9.32%, up 3.67 pct year on year; net profit margin 7.76%, up 4.46 pct year on year.
Incident comments
By business, the company's mobile phone business and other business revenue in 2023 were 57.348 billion yuan and 3,972 billion yuan, respectively, up 34.88% and 16.50% year on year; gross margin was 24.18% and 31.49%, respectively, up 3.57 pct and 0.69 pct year on year, respectively. The mobile phone business is still the core source of the company's revenue and profit. As the company actively upgrades its product structure and optimizes costs, its profitability has increased significantly. In 2023, the company shipped approximately 194 million mobile phones as a whole.
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. According to IDC statistics, the company's share of the smart phone market in Africa was over 40% in 2023, ranking first in Africa. 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's expansion in emerging markets is still going well. In 2023, the company's revenue in Africa and other regions such as Asia was 22.064 billion yuan and 39.256 billion yuan respectively, up 6.74% and 55.19% year-on-year respectively. Emerging markets outside of Africa are becoming the core driving force for the company's growth.
In terms of internet business. By the end of 2023, there were more than 10 million monthly active users of various application products developed independently and collaboratively, mainly music application Boomplay, news aggregation application Scooper, and Phoenix, a comprehensive content distribution application. In terms of expanding the category business, the company customizes products based on the deep insight of local users, increases research and development of localized products, while deepening channels, expanding retail layout, strengthening digital capabilities, and achieving channel construction and coverage for offline brand specialty stores, specialty stores, and new business formats; through further improvement of the operating system, cost reduction and efficiency, the company gradually forms a sustainable development of the expanded category business.
The growth logic is clear, and I am optimistic about the company's competitiveness and long-term growth space. The company has built solid operating barriers in emerging markets, and the competitive pattern is clear. Smartphone sales still have plenty of room for growth. As the market recovers, the company is also expected to surpass the industry's growth rate. In the long run, Voice is the leading hardware and internet leader, and is expected to develop a deeper level of diversified monetization of content terminals on the basis of OS monetization. And the company's co-creation and share+Glocal soft power will help the company maintain high long-term growth. It is expected to achieve net profit of 6.36 billion yuan, 7.76 billion yuan, and 9.20 billion yuan in 2024-2026. The PE corresponding to the current stock price is 19x, 15x, and 13x, respectively, maintaining a “buy” rating.
Risk warning
1. Consumer electronics demand is uncertain;
2. There is uncertainty about the pace of new market expansion.