Net profit soared 210%! But the stock price collapsed, what happened to the 'King of African Phones'?

Transsion Holdings, known as the "King of African Phones," released an impressive financial report. Strong performance coupled with generous dividends instantly ignited the capital market.

However, to the market's surprise, Transsion Holdings' stock price not only failed to rise but instead plummeted. What exactly happened?

On the evening of April 24, Transsion Holdings released its Q1 2024 financial report, showing revenue of 17.443 billion yuan, up 88.10% year-over-year; net profit attributable to shareholders of 1.626 billion yuan, up 210.30% year-over-year; and adjusted net profit of 1.354 billion yuan, a staggering 342.59% increase year-over-year.

Notably, the company recently released its 2023 financial report, which showed annual revenue of 62.295 billion yuan, up 33.69% year-over-year; net profit attributable to shareholders of 5.537 billion yuan, up 122.93% year-over-year; and adjusted net profit of 5.134 billion yuan.

Along with this report came a generous dividend "package."

According to Transsion Holdings' dividend plan, based on the total share capital registered on the record date for the 2023 equity distribution, the company will distribute a cash dividend of 30 yuan per 10 shares (tax inclusive) and issue 4 additional shares per 10 shares.

This translates to a total dividend payout of 2.42 billion yuan. Notably, in Q3 2023, Transsion Holdings also announced a dividend of 30 yuan per 10 shares. In other words, the two dividends in 2023 totaled 4.84 billion yuan, almost the company's entire net profit for 2023.

So, why is Transsion Holdings so bold with its dividends?

Data shows that Transsion Holdings' R&D expenses in 2023 were 2.256 billion yuan, accounting for only about 3.6% of total revenue. In Q1 2024, R&D expenses were 588.8 million yuan, or 3.37% of total revenue, while net profit reached 1.626 billion yuan. As of the end of Q1 2024, the company's cash reserves stood at 10.47 billion yuan, with notes and accounts receivable at just 2.166 billion yuan. This indicates strong cash flow, eliminating the need to retain large cash reserves.

Additionally, beyond its strong revenue-generating capabilities, the company boasts high gross margins. According to the financial report, Transsion Holdings' gross margin in 2023 was 24.66%, compared to just 14.59% for Xiaomi's smartphone business, which is currently very popular. This highlights just how profitable Transsion Holdings is.

Looking at the company's overseas revenue structure, in 2023, Transsion Holdings held over 40% of the smartphone market share in Africa, ranking first. Moreover, it has expanded beyond Africa into several Asian countries, with over 40% market share in Pakistan (ranking first) and over 30% in Bangladesh (also ranking first)...

The above data confirms that Transsion Holdings is indeed a highly profitable company. As for why the stock price plummeted after the earnings release, Kanjian Finance attributes it largely to the stock's current valuation.

Statistics show that since late October 2022, Transsion Holdings has been on an upward trend, with gains exceeding 230% by mid-April 2024.

The financial report reveals that Transsion Holdings' market share in Africa is declining, indicating that as it deepens its presence in Africa, the market is stabilizing. Future growth will likely come from Asia and other regions. However, it's worth noting that product gross margins in Asia and other regions are lower than in Africa, which may be one reason for market concerns.

Kanjian Finance believes that despite concerns about Transsion Holdings' future growth, its position as the "King of African Phones" remains unchallenged in Africa. Moreover, amid weak global demand for consumer electronics, Transsion Holdings continues to maintain stable and high growth, a testament to its strength. Therefore, from this perspective, we judge that the company will maintain its competitive advantage for a long time to come.

The stock price plunge after the earnings release is largely attributed to the current market environment. As a high-dividend stock, the current adjustment is a normal market reaction.