Goldman Sachs Maintains Transsion Sell Rating, Targets Price at 50 Yuan

Overview

Goldman Sachs released a research report maintaining the 'Sell' rating on Transsion Holdings (688036.SS) and lowering its 12-month target price from 55 RMB to 50 RMB. The core logic lies in severe cost pressures facing the global smartphone market; particularly after a significant price increase in mobile DRAM in Q1 2026, a spike is expected to continue into Q2, significantly suppressing end-user consumption demand. Although Transsion plans to launch new products with Edge AI capabilities in H2 2026 to boost competitiveness, the institution believes the high-cost environment will lead to a double decline in revenue and gross margin in the short term, thus lowering profit forecasts for the next three years.

Core views

Industry Environment and Cost Pressure: The report points out that mobile DRAM prices rose 58-63% QoQ in Q1 2026, causing Transsion's smartphone shipments in Q1 to drop to 21 million units (down 10% QoQ). Goldman Sachs expects DRAM prices to further rise 74-77% QoQ in Q2 2026. Under this high-cost environment, overall smartphone market consumption is suppressed, with global markets declining 3% YoY in Q1. In contrast, premium brands like Apple, Samsung, and Huawei saw YoY shipment growth due to lower user price sensitivity, while value-focused brands like Transsion face greater challenges. Product Innovation and AI Layout: To cope with competition, Transsion plans to launch the Phantom V Fold 3 foldable phone in September 2026, equipped with MediaTek Dimensity 9300 chip, enhancing AIGC capabilities, supporting running 7-billion parameter models on phones with speeds of 20 tokens per second, and capable of generating images from text commands within 1 second. Additionally, the Pova 8 Pro launching in July 2026 is expected to optimize CPU/GPU load via AI algorithms, improving heat dissipation and extending battery life. These moves aim to align with AI phone trends and enhance product appeal. Financial Forecast Adjustment: Based on concerns about market prospects, Goldman Sachs downgraded Transsion's net profit forecasts for 2026-2028 by 18%, 9%, and 6% respectively, mainly reflecting expectations of slowed revenue growth and margin compression. However, compared to Bloomberg consensus estimates, Goldman Sachs's net profit forecasts are still 11% higher (2026) and 17% higher (2027), benefiting from assumptions that the company can maintain strict operating expense control amidst low revenue growth (estimated OPEX maintained at RMB 8-10 billion for 2026-2028). Valuation and Rating: Goldman Sachs uses P/E valuation method, assigning Transsion an 11x forward P/E for 2027, consistent with peer averages and in the middle-to-lower range of the company's historical trading band (8-48x). Based on this, the target price is calculated at 50 Yuan, representing approx 6.6% downside from current price. Given its upside potential is far below the average for 'Buy' and 'Neutral' rated stocks in Goldman Sachs Greater China Tech sector, the Sell rating is maintained.

Analysis framework

Goldman Sachs follows a logic chain of 'Macro Cost Transmission -> Industry Competitive Landscape -> Company Fundamentals Adjustment -> Relative Valuation'. First, starting from volatile upstream DRAM memory prices, judge the transmission effect on downstream smartphone total unit costs and terminal selling prices, thereby inferring suppression on consumer demand (especially price-sensitive markets). Second, by comparing shipment performance of different brands (premium vs value-for-money) under the same cost pressure, verify Transsion's unfavorable competitive position. Next, combined with progress on upcoming AI new products, qualitatively assess long-term competitiveness, but quantitatively focus more on the impact of short-term costs on the income statement, thus downgrading earnings forecasts. Finally, determine target price and investment conclusion by horizontal comparison of peer valuation multiples and vertical review of historical valuation intervals.

Methodology notes

• Industry/Industrial Analysis FrameworkUpstream-Midstream-Downstream Supply Chain Transmission

  Transmission mechanism of upstream raw material (DRAM) price fluctuations to downstream finished device manufacturing and terminal consumption

  The report analyzes the sharp rise in upstream memory chip prices, deriving its squeezing effect on mid-stream handset manufacturers' cost structures, and finally how it suppresses downstream consumers' willingness to buy, embodying typical supply chain price transmission analysis logic.

• Valuation MethodPE/PEG valuation

  Relative valuation based on peer average P/E ratio

  The institution selects 11x forward P/E for 2027 as valuation anchor, referenced against peers such as Xiaomi, ASUS etc., and combined with company historical valuation interval for rationality check, typical application of relative valuation.

• Company Fundamentals and Financial FrameworkOperating/Financial Leverage Analysis

  Analysis of Operating Expense Rigidity under Low Revenue Growth

  The report focuses specifically on whether the company can keep operating expenses within reasonable scope (8-10 billion Yuan) under slowed revenue growth rate (Estimated CAGR 10% for 2025-28), involving judgment on operating leverage effect, i.e., impact of fixed cost proportion change on profit margin.

Asset mapping & comparison

Structured mapping from thesis to named assets (strengths, weaknesses, peers, risks).

• Transsion Holdings (688036.SS)

  Impacted Party: High memory costs directly squeeze gross margin, and its main market users are price sensitive, with demand clearly suppressed.

  Strengths

  Strong foundation in cost-effective models, early layout in AI phones (Phantom V Fold 3/Pova 8 Pro), strong ability to control operating expenses.

  Weaknesses

  Weak brand premium capability compared to Apple/Huawei, poor resistance to upstream component price volatility.

  Comparison

  Compared to Apple/Samsung/Huawei achieving shipment growth in 1Q26, Transsion shipments declined QoQ, performing behind top industry premium brands.

  Risks

  Memory cost decline slower than expected, AI phone promotion falling short of expectations, non-phone business expansion hindered.

Key data

• 1Q26 Mobile DRAM Price Increase Rate58-63% (QoQ)Significant QoQ increase in Q1, pushing up phone BOM costs
• 2Q26 Mobile DRAM Price Forecast Increase Rate74-77% (QoQ)Goldman Sachs expects cost pressure to intensify further in Q2
• 1Q26 Transsion Shipments21 million unitsDown 10% QoQ, affected by cost and weak market demand
• Net Profit Forecast Downgrade Magnitude2026E: -18%, 2027E: -9%, 2028E: -6%Reflects pessimistic expectations on revenue and gross margin
• Target P/E Ratio (2027E)11xConsistent with peer average, in middle-to-lower range of historical valuation interval
• New Target PriceRMB 50.00Downgraded from previous target 55 Yuan, implies 6.6% downside space

Impact & implications

For Transsion Holdings, significant earnings pressure is expected in the short term, investors should be wary of potential gross margin decline in Q2 financial reports. Although AI feature introduction helps improve product differentiation, under high cost environment, weakened value-for-money advantage may lead to loss of market share. For the industry, if DRAM prices stay high, mid-to-low-end phone brands targeting emerging markets generally face risks of quantity and profit double kill, potentially accelerating industry consolidation. Only when memory costs fall or AI phones bring a significant replacement wave can Transsion's performance see substantive recovery after 2027.

Risks

• Smartphone shipment growth faster or slower than expected
• Smartphone Average Selling Price (ASP) growth faster or slower than expected
• Non-smartphone business expansion faster or slower than expected

What to watch

• Whether memory cost上涨 slows earlier than expected
• Potential consumption downgrade whether giving Transsion larger potential user base
• Whether AI smartphone sales ramp up stronger than expected to offset adverse environment