event: on April 23, transmission holdings released its 2023 annual report. On April 25, the company released its first quarter 2024 report.

1) for the whole year of 2023: the company achieved revenue of 62.295 billion yuan, up 33.69 percent from the same period last year; net profit attributable to the parent was 5.537 billion yuan, up 122.93 percent from the same period last year; net profit attributable to the parent after deducting non-profit was 5.134 billion yuan, up 131.61 percent from the same period last year.

2) Q4 in 2023: the company achieved a single-quarter revenue of 19.273 billion yuan, up 82.44 percent year-on-year; achieved a single-quarter net profit of 1.653 billion yuan, up 632.38 percent year-on-year; and achieved a single-quarter net profit of 1.625 billion yuan, up 827.73 percent year-on-year.

3) Q1 2024: the company achieved a single-quarter revenue of 17.443 billion yuan, up 88.10 percent year-on-year; To achieve a single-quarter net profit of 1.626 billion yuan, up 210.30 percent year-on-year; To achieve a single-quarter net profit of 1.354 billion yuan, up 342.59 percent year-on-year.

revenue profit growth, profitability continued to pick up. 1) Growth capacity: From the 23 full-year and 23Q4/24Q1 single quarter, the company's revenue and profit increased significantly compared with the same period last year, 23Q4 single-quarter net profit growth rate hit a new high since the company's listing. The main reason for the company's revenue growth is that the company continues to explore emerging markets and promote the upgrading of product structure, and mobile phone shipments have achieved good growth. 2) Profitability: The company's gross profit margin/net profit margin in 2023 was 24.45/8.97 respectively, +3.13pct / +3.68pct year on year; 24Q1 gross profit margin/net profit margin was 22.15/9.37, up -1.21pct / +3.72pct year on year. Although Q1 gross profit margin decreased slightly, net profit margin further rebounded. 3) Cost Control: The company's sales/management/research and development/financial expenses for the whole year were 7.85/2.42/3.62/-0.28 respectively, up from +0.08pct/-0.30pct/-0.84pct/-0.01pct year on year. The research and development cost rate dropped somewhat, mainly because the growth rate of income was higher than that of research and development costs, and the company's research and development investment in mobile phone products and mobile interconnection was continuously strengthened. 24Q1 All cost rates have fallen year-on-year, further achieving cost reduction and efficiency.

regional market expansion overlay product structure upgrade, promote the global market share steadily increased. 1) Regional expansion: On the basis of consolidating market share in Africa, the company further explores emerging markets such as South Asia. In 2023, the company shipped 0.194 billion mobile phones as a whole, up 24.2 percent from about 0.156 billion in 2022. According to IDC data, the company has a 14.0 per cent share of the global mobile phone market, with mobile phone brand manufacturers ranking third, of which smartphones have a global market share of about 8.1 per cent, ranking fifth. In terms of regional market, in 2023, the company has a market share of more than 40% in Africa/Pakistan, more than 30% in Bangladesh, about 8.2 in India, ranked first in Africa/Pakistan/Bangladesh and sixth in India. 2) Structural upgrade: the company continued to strengthen the breakthrough of high-end products, smartphone sales continued to increase. In 2023, the company's smartphone sales increased by 40.4 percent year-on-year to about 51.4 billion yuan, with revenue accounting for 82.5 percent and gross profit margin of about 23.8 percent; feature phone sales were about 5.942 billion yuan, essentially flat year-on-year, revenue accounting for 9.5 percent and gross profit margin of about 27.5 percent. The increase in the proportion of sales of medium and high-end products is expected to further open up the company's long-term growth space. IDC data show that 2024Q1 voice smartphone shipments increased 84.9 percent year-on-year to about 28.5 million units, and the global market share rose to 9.9 percent from 5.7 percent in 23Q1, ranking fourth.

continue to promote technology iteration and upgrade, AI innovation to enhance the user mobile experience. The company continues to iterate technology and upgrade products through a three-tier R & D system of basic research, technology development and product development. In 2023, the company will continue to tackle key problems in the fields of imaging, appearance, basic experience, games, AI, charging, etc, it has released innovative technologies or product achievements such as Universal Tone image technology, W-type variable aperture technology, liquid telephoto macro lens, chameleon iridescent technology, E-Color Shift technology, transient audio enhancement technology, explorer satellite communication technology, 260W +110W full-scene fast charging technology, AirCharge charging technology from a distance, wide temperature battery technology, AI digital person, scroll screen concept mobile phone PHANTOM Ultimate, etc. In March 2024, the company's TECNO brand announced the launch of TECNO AIOS in MWC 2024 to enhance users' mobile experience with AI. TECNO AI includes an upgraded personal AI assistant Ella, which can realize functions such as real-time phone translation, automatic generation of video subtitles, creative generation of wallpaper and pictures, and accurate search of photos with simple descriptions. We believe that the company's research and development in technology and products, as well as the blessing of AI technology, will continue to improve the user experience, help the company improve the mobile Internet ecosystem, and increase the number of paid users and ARPU value of software services products.

to accelerate the development of mobile Internet and expand the category of business, and gradually build AIoT intelligent ecology. Based on the leading advantages accumulated in emerging markets, the company actively implements a diversified strategic layout, develops expanded business such as digital accessories and household appliances in emerging markets, and provides mobile Internet products and services. In 2023, the company will increase the research and development of localized products, while deepening channels, expanding retail layout, strengthening digital capabilities, and realizing the channel construction and coverage of offline brand stores, special area stores, specialty stores and new business stores. In January 2024, TECNO announced a full presence in Temu, a cross-border e-commerce platform, with the first opening of Mexico to further explore the global cross-border e-commerce landscape and accelerate the global emerging market layout. In terms of mobile Internet products and services, the company has conducted strategic cooperation with many leading domestic Internet companies such as NetEase and Tencent in multiple application fields, and actively developed and incubated mobile Internet products. By the end of 2023, there are more than 10 million monthly live users of a number of independent and cooperative application products, and many applications are recognized by African users.

continued high dividends returned to shareholders, with cash dividends exceeding 4.8 billion yuan in 2023 and a dividend payout rate of 87.4 percent. The principle of profit distribution of the company pays full attention to the reasonable return on investment to investors and takes into account the sustainable development of the company. According to the 2023 annual report, the company intends to distribute the amount including tax of 2.42 billion yuan, accounting for 43.70 of the company's net profit in 2023. Together with the equity distribution that the company has implemented in the first three quarters of 2023, the total amount of cash dividends in 2023 is about 4.839 billion yuan, accounting for 87.40 of the net profit attributable to 2023. Since its listing, the company has insisted on actively paying dividends to investors, with a cumulative cash dividend of 6 times and a cumulative cash dividend of 8.897 billion yuan, with an average dividend rate of 49.33.

Investment advice: As a global head mobile phone manufacturer in emerging markets, the company is expected to continuously improve its global mobile phone market share through regional expansion, product structure upgrading, technology research and development and product experience optimization. At the same time, the increase in the proportion of smartphones will also drive the rapid growth of the company's mobile phone ASP, the company's long-term growth momentum is sufficient.

in view of the better-than-expected performance of 24Q1 company, we raised the company's operating income forecast from 2024 to 2026 to 76.297 billion yuan/88.516 billion yuan/100.311 billion yuan, and adjusted the company's net profit forecast to 6.562 billion yuan/7.893 billion yuan/9.109 billion yuan. based on the closing price on April 26, the forward PE from 2024 to 2026 is 18.30 times/15.21 times/13.18 times respectively, maintaining the "buy" rating.

risk: consumer electronics market demand is less than expected risk; smartphone industry competition increases risk; the company's new business development progress is less than expected risk.