Communication Holdings released the 2023 Annual Report and the 2024 First Quarter Report:
In 2023, the company achieved revenue of 62.295 billion yuan, a year-on-year increase of 33.69%; realized net profit to mother of 5.537 billion yuan, an increase of 122.93% over the previous year. In the first quarter of 2024, the company achieved revenue of 17.443 billion yuan, an increase of 88.10% over the previous year, and realized net profit of 1,626 billion yuan, an increase of 210.30% over the previous year.
Key points of investment
Performance surpassed expectations, and profitability increased dramatically
Benefiting from the development of emerging markets and product structure upgrades, the company's overall shipment volume increased in the first quarter of 2024, and revenue increased 88.10% year-on-year. On the cost side, increased operational efficiency combined with high revenue growth brought about a scale effect. The cost rates for 2024Q1 management, sales, and R&D all declined, and the overall cost ratio decreased by 5.97 pct year-on-year during the period. In terms of profitability, due to varying increases in mobile phone supply chain device prices in 2024, gross margin fell 1.21pct year on year, but the company's net profit to mother increased 210.30% year over year, supported by increased revenue, increased gross profit, and lower cost ratios.
The African market has consolidated its competitive advantage, and the company has achieved remarkable results in developing new markets, and its share in the global smartphone market continues to increase. According to IDC statistics, the company's market share increased 4.2 pct to 9.9% year-on-year in the first quarter of 2024. The company continues to consolidate its competitive advantage in Africa. In 2023, it ranked first in the African smart phone market with a share of more than 40%; in the South Asian market, Pakistan and Bangladesh had a smart phone market share of more than 40% and 30% respectively, ranking first. The company adheres to innovation in localization technology and digs deep into the needs of user scenarios. It released Universal Tone multi-skin tone imaging technology, pre-ISP (Image Signal Processor) chip customization technology solutions, and cuttlefish eye variable aperture technology in 2023. It has industry-leading dark skin tone database advantages and an original dark skin tone imaging engine. In addition, the company has developed a user product scenario suitable for weak networks and no-network environments in Africa — an offline model, focusing on different stages of operation throughout the life cycle, and signed a Memorandum of Cooperation with the United Nations Economic Commission for Africa in October 2023 to jointly promote and accelerate Africa's digital transformation.
In response to the characteristics of high traffic costs, low bandwidth, and low memory configurations in emerging markets, the company has developed technologies such as traffic saving, memory fusion, localized speech recognition in small languages, and voice noise reduction.
Focus on AIGC and implement diversified strategic layout
In March 2024, the company launched TECNO AIOS, which aims to make mobile life simpler and more efficient in terms of smartphone operation, information acquisition, content creation to service acquisition, and enhance the AI mobile experience of global users in all aspects. At the same time, the company also released the first PolarACE imaging system equipped with Sony's CXD5622GG imaging chip, which achieved 4K 30fps full-scene AI-NR HDR video shooting for the first time in the industry, and will be applied to the new CAMON 30 Premier 5G model released in Q2 2024. Furthermore, the company actively implements a diversified strategic layout, continuously enhances product capabilities to expand categories of business, customizes products based on the deep insight of local users, increases localized product development efforts, and at the same time deepens channels, expands retail layout, strengthens digital capabilities, and gradually forms sustainable development.
Profit forecasting
It is predicted that the company's revenue for 2024-2026 will be 744.09, 876.69, and 99.90 billion yuan, respectively, and EPS will be 8.03, 9.40, and 11.29 yuan respectively. The PE corresponding to the current stock price is 18, 16, and 13 times, respectively, maintaining a “buy” rating.
Risk warning
Risk of exchange rate fluctuations, risk of emerging market expansion falling short of expectations, risk of technological iteration, risk of downstream recovery falling short of expectations, etc.