Morgan Stanley: Transsion Holdings — Fine-Tuning Estimates After 4Q25 Results
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Following the release of Transsion Holdings' fourth-quarter 2025 results, Morgan Stanley fine-tuned its earnings per share estimates for 2026 and 2027, lowering projections by 2.8% and 1.8%, respectively. Despite these adjustments, the bank maintains its Equal-weight rating and a target price of RMB 60.00. The firm believes Transsion lacks sufficient resilience against the projected 2026 smartphone downturn. The company's revenue remains heavily reliant on low-end smartphones, with non-handset revenue accounting for only 10% of total sales in 2025, leaving it vulnerable to cyclical headwinds and rising memory costs.
For 2026, Morgan Stanley expects Transsion's smartphone shipments to decline by 4.5% year-over-year, accompanied by a gross margin contraction from 18.1% in 2025 to 12.9%. Although revenue from internet of things and internet services is projected to grow 45% and 19.6%, respectively, these segments remain too small to offset the mounting pressures facing the core handset business.
The maintained target price relies on a residual income model and a sum-of-the-parts valuation, applying a 10% cost of equity for the mobile business and 11.3% for IoT and internet services. The bank also outlined a bull case target of RMB 100.00, assuming accelerated smartphone and IoT penetration in Africa, alongside a bear case target of RMB 35.00, reflecting delayed demand recovery and intensified competition.