On October 28, Transsion Holdings (SH688036, share price 95.50 yuan, market value 108.9 billion yuan) disclosed the third quarter report of 2024.

The above report shows that in the third quarter of 2024, Transsion Holdings achieved operating income of 16.693 billion yuan, a year-on-year decrease of 7.22%, and net profit attributable to the parent company was 1.051 billion yuan, a year-on-year decrease of 41.02%. In the first three quarters, the company's revenue was 51.252 billion yuan, a year-on-year increase of 19.13%, and the net profit attributable to the parent company was 3.903 billion yuan, a year-on-year increase of 0.50%.

The reporter of "Daily Economic News" noted that for the reasons for the change in the net profit attributable to the parent company in the third quarter of 2024, Transsion Holdings explained in the financial report that it was mainly affected by market competition and supply chain costs.

Further increase R&D investment

According to public information, Transsion Holdings was established in 2013 and is headquartered in Shenzhen, mainly engaged in the design, research and development, production, sales and brand operation of smart terminals with mobile phones as the core; The main products are mobile phones of the three major brands of TECNO (mid-to-high-end brand), itel and Infinix (mass brand), including feature phones and smartphones. Transsion once accounted for 57% of the African market, so it was known as the "King of Africa". According to IDC data, as of the first half of 2024, the company's share of the African smartphone market exceeded 40%, although the high point has declined, it still ranks first in Africa.

The reporter noted that in the first quarter of 2024, Transsion Holdings' operating income was 17.443 billion yuan, a year-on-year increase of 88.10%, and the net profit attributable to the parent company was 1.626 billion yuan, a year-on-year increase of 210.3%. However, in the second quarter, the company's operating income and net profit have dropped to 17.115 billion yuan and 1.226 billion yuan respectively.

In the record of investor relations activities released at the end of September 2024, Transsion Holdings explained the reasons for the decline in the company's performance in the second quarter: "On the basis of its dominant position in the African mobile phone market, the company continues to promote the expansion of other emerging markets, and at the same time continues to increase its efforts and accelerate the development of mobile Internet, expand categories and other businesses, and gradually build an ecosystem of balanced and coordinated development of smart terminals and mobile Internet business." The company will further increase R&D investment and build core capabilities in the technical channels of imaging, gaming, AI, charging, and basic experience. ”

In terms of gross profit margin, Transsion Holdings' 2024 semi-annual report underwent a change in accounting policies, including guarantee warranty expenses in operating costs. After adjustment, the gross margin for the first half of 2024 was 21.53%, compared to 22.31% before adjustment.

For the performance outlook for the fourth quarter of 2024 or the company's future development expectations, on the morning of October 29, the reporter of "Daily Economic News" called the Securities Department of Transsion Holdings to understand the situation, and its relevant staff only said: "The information we publicly disclose shall prevail." ”

Facing patent litigation troubles

It is worth noting that unlike other domestic mobile phone manufacturers, Transsion Holdings' sales areas are mainly concentrated in countries in emerging markets around the world, such as Africa, South Asia, Southeast Asia, the Middle East and Latin America. According to the data disclosed by the company, as of the first half of 2024, Transsion has performed well in the South Asian market, ranking first in the smartphone market share in Pakistan, first in Bangladesh, and seventh in India.

As we all know, the smartphone market in emerging markets has great potential, and the replacement of feature phones for smartphones is still an important driver. However, as major mobile phone manufacturers also enter emerging markets such as Southeast Asia, Africa, and Latin America, the competitive pressure of Transsion Holdings is also increasing.

In response to the competition from other manufacturers, Transsion Holdings said at its August 2024 earnings briefing: "In various markets, mobile phone manufacturers have always existed, and the company has always faced the problem of competition. After years of development, the company has formed its own business characteristics, including: firmly making a brand in overseas markets, all resources, strategies and teams are focused on brand building and investment in overseas markets; Insist on business and team localization; In terms of product differentiation, product planning is carried out according to the core market area. However, in terms of opening up new markets, Transsion Holdings is currently facing the trouble of patent litigation.

Since July, Qualcomm has successively sued Transsion Holdings and its subsidiaries in the name of patent infringement in relevant courts in India, Germany and other places, claiming that Transsion infringes its patent rights, and demanding that the company and its subsidiaries stop infringing, deliver and destroy the relevant products containing the patents involved in the lawsuit, and compensate for losses.

Regarding the progress of the patent dispute between the two parties, Transsion Holdings stated in the above-mentioned record of investor relations activities that the company respects the intellectual property rights of third parties, is willing to follow the principles of fairness, reasonableness and non-discrimination, and reaches an intellectual property license agreement with the patentee through friendly negotiation, and Transsion will continue to carry out patent negotiations.