Text: Flying Snow
Source: Bowang Finance
A few days ago, Konka (stock name: Shenzhen Konka A; Abbreviation: Konka) disclosed that its annual revenue in 2023 was 17.85 billion yuan, a year-on-year decrease of 39.71%; the net profit loss attributable to the parent company was 2.164 billion yuan, a year-on-year decrease of 47.15%; Net profit after deducting non-attributable to the parent decreased by 9.38% year-on-year to -2.914 billion yuan.
Source: Shenzhen Kangjia A-2023 Annual Report
Konka's 2024 first quarter report released shortly thereafter showed that its revenue for the quarter was 2.463 billion yuan, a year-on-year decrease of 46.47%; The net profit attributable to shareholders of listed companies was -510 million yuan, a year-on-year decrease of 434.49%, and a profit of 153 million yuan in the same period last year.
At that time, the leader of China's home appliance industry and the leading color TV, Konka, why did it come to such an "embarrassing situation" where both profits and profits plummeted year after year in just a few years? What kind of "thoughtful and terrifying" data is hidden in its financial report? At the level of corporate strategy, management decision-making and specific business, why is Konka trapped in the "vicious circle" of "blind expansion", so that it pays a huge price for it? Next, is the "self-help" strategy proposed by Konka the real "convergence" of its blind expansion ambitions, or is it a "panacea" that is still at the fingertips of the "lost returnees" in the existing long-term market and enough to change their financial situation and corporate predicament?
01
Citing the Shenzhen Stock Exchange to issue an inquiry letter, how many "careful thoughts" are there in Konka's financial situation?
A closer look at Konka's 2023 report card, combined with its main financial indicators in the past few years, there are several sets of data that can be described as "shocking" and even quite "puzzling".
It is no wonder that on April 22, the Shenzhen Stock Exchange issued a letter of inquiry to Konka Group, asking for an explanation of the situation on issues related to its annual report.
Source: Shenzhen Stock Exchange
It can be seen that at least the following sets of financial indicators all indicate that Konka is "sick":
First, in terms of revenue, although Konka announced in 2023 that it will return to its main business, advocate long-term value, and achieve transformation under the new strategic framework of "one axis, two wheels and three drives". However, the annual revenue not only plummeted by 39.7%, but it can be regarded as a shrinking or more than half of the revenue. After all, the revenue in 2023 will be 17.849 billion yuan, while in the same period in 2022, it will be 29.608 billion yuan, a year-on-year decrease of 39.71%. Dating back to the high level of Konka's revenue of about 55 billion yuan, the "shrinkage" of its revenue has actually started year by year since 2020. Its revenue scale in 2023 will fall below 20 billion yuan, which is equivalent to more than half of the 55.1 billion yuan in 2019.
Second, losses continue and profitability is "weakening". This can be described as the capital market's "careful thinking and fear" that Konka is more worried about. Not only its 2023 annual report shows that Konka recorded a net profit loss of 2.164 billion yuan that year, an increase of 47.15% year-on-year. More importantly, its annual non-net profit in 2023 will also be expanded to 2.914 billion yuan.
Third, the debt ratio has hit a new high in the past decade, and behind the debt "mountain" is the "mountain" of capital under pressure? According to the data, as of the end of December 2023, Konka's asset-liability ratio was 83.51%. Among them, the current liabilities are as high as 18.446 billion yuan, and the monetary funds in hand are only 5.824 billion yuan. Under the general trend that the capital market is paying more and more attention to the hematopoietic ability of a listed company, why did Konka go to the "field" of being eager for "big blood transfusion"?
In the 2023 annual report, Konka gave five reasons for its net loss in 2023, including the loss of color TV business, the continuous contraction of the park business, the failure of the semiconductor business to achieve large-scale and efficient output in the early stage of industrialization, the provision for impairment of 1.017 billion yuan, and the decline in business income such as industry and trade and environmental protection.
After the annual report was released, including the specific analysis of the above-mentioned major reasons, the inquiry letter urgently issued by the Shenzhen Stock Exchange can be said to directly point to Konka's multiple "pain points", and was even called "soul torture" by some investors.
Among them, Konka disclosed that the company's impairment provisions from 2019 to 2023 were 835 million yuan, 1.185 billion yuan, 1.75 billion yuan, 1.245 billion yuan, and 1.017 billion yuan. The impairment provision for 2023 includes a provision for inventory decline of RMB372 million, a provision for bad debts of other receivables of RMB254 million, a provision for bad debts of accounts receivable of RMB209 million, and an impairment provision of RMB107 million for long-term equity investments.
Moreover, Konka also disclosed that the book balance of its other receivables at the end of 2023 was 3.063 billion yuan, the cumulative provision for bad debts was 2.082 billion yuan, and the book value was 989 million yuan.
In this regard, the inquiry letter of the Shenzhen Stock Exchange "bears the brunt" of the situation, specifying the relevant situation.
Another set of problems is more necessary to mention, because this may be the "root" that led to Konka's revenue and net profit plummeting year after year and consecutive losses.
Konka's 2023 annual report shows that the gross profit margins of Konka's color TV, memory chip trade and semiconductor business in 2023 will be -1.02% and -1.06% respectively, and the gross profit margin of the white appliance business will be 10.97%, according to the cost composition data, the operating costs of color TV, memory chip trade and semiconductors and white electricity business will be 4.757 billion yuan, 3.433 billion yuan and 3.79 billion yuan respectively, a year-on-year decrease of 6.4%, a decrease of 66.94%, and an increase of 7.58%.
In this regard, the Shenzhen Stock Exchange requires:
(1) According to the reply to the inquiry in the previous annual report, the decline in the gross profit margin of the company's color TV business in 2022 is mainly affected by three factors: the decline in the average price of products, the high cost of production line upgrade and switchover, and the lack of effective matching between sales and production stocking. Please explain whether the above factors have improved this year, the measures have been taken and the effectiveness, the sustainability of the negative gross profit operation of the company's color TV business, and further analyze and explain the specific reasons and reasonableness of the difference in gross profit margin compared with the average gross profit margin level of the industry and the gross profit margin of comparable companies.
(2) The company carries out trading business around the memory chips involved in its main business, and the operating profit comes from the price difference between upstream procurement and downstream sales. Please add the specific time, decision-making process, product type, procurement channel, procurement pricing method and purchase price range, main suppliers and related relationships, sales pricing method and sales price range, revenue recognition policy, settlement method and payment collection situation of this type of business, and further explain the specific reasons and reasonableness of the negative gross profit margin of memory chip trade and semiconductors in combination with the above situation, compare the similar business situation in the industry, and explain whether the company's relevant business operation is in line with industry characteristics and general business logic.
(3) The gross profit margin of the company's white power business in 2023 increased by 0.63% year-on-year, which is slower than the growth rate in 2022. Please explain the operating cost accounting method, aggregation process, detailed composition and changes according to the type of subdivided products, and further explain the specific reasons and reasonableness of the cost increase, and whether it is consistent with the changes in the cost of similar businesses in the industry.
There are so many inquiries raised in this inquiry letter from the Shenzhen Stock Exchange, which I will not repeat here. And the main business of color TV, memory chip trade and semiconductor business can be described as "rout across the board" in 2023, how did it go from a home appliance giant to a multi-line fiasco today?
02
"Blind expansion" that began in 2017 and "expanded" in 2023
July 2017 was a hot and upsetting summer day. And in the summer of that year, the "big gear" that determined Konka's future fate began to be launched.
Source: Yicai
Liu Fengxi, then chairman of the board of directors of Konka Group, said in an interview with the first financial reporter at the time, color TV has always been Konka's main core business, but "Konka is no longer just a color TV business company", what the group has to do is to invest in holding and expand the investment business.
Liu Fengxi told the media reporter that Konka wants to transform into an investment holding platform mainly due to three considerations: first, it hopes to expand new product lines; second, it hopes to achieve expansion through investment and mergers and acquisitions; Third, it is hoped that through direct investment, an Internet of Things ecosystem will be formed.
Why did Liu Fengxi expand "as he said" at that time, and said that he wanted to expand the investment business? The background is that in Liu Fengxi's view at that time, Konka "walked out of turmoil" in 2015, "resumed growth" in 2016, and stabilized the team in 2017, and now has the foundation for a new round of development.
It was also in this year that Zhou Bin, who joined Konka after graduating in 2001, was appointed as the president of Konka Group. The following year, according to Jiemian News, Konka planned to have a revenue of 60 billion yuan by 2020 and cultivate three new industries with a revenue of more than 10 billion yuan. President Zhou Bin also said, "It will take 5-10 years to become one of the world's leading semiconductor companies, and we are committed to becoming one of the top 10 semiconductor companies in China, with an annual revenue of more than 10 billion yuan." ”
In addition, the management represented by Zhou Bin has also set a "small goal" of achieving annual revenue of 8 billion to 12 billion yuan within 1-2 years for the environmental protection business involved in Konka's expansion of territory. It also hopes to use 3-5 years to create a first-class high-end brand of environmental protection operation and maintenance in China, and achieve the strategic goal of annual revenue of 18 billion to 26 billion yuan.
This began with Liu Feng's words of "expansion" and "bigger", and landed in the specific expansion and development plan of "science and technology + industry + park" established by the new president Zhou Bin. Konka quickly used a variety of "weapons" such as war investment and joint ventures to enter a number of new fields that are "unfamiliar" to Konka, which is the main business of household appliances.
For example, under the investment boom in industrial parks, "Konka speed" has been fully reflected, and it has signed cooperation agreements with the governments of Chuzhou, Suining, Nanjing, Yibin and Haimen, with a total investment of up to 43 billion yuan for the development of science and technology industrial parks in these five regions.
As an "emerging industry" at that time, the environmental protection industry was also a "hot sunrise project" in the eyes of many large enterprises. Konka has also "expanded its territory" and quickly focused on specific business "territories" such as water pollution prevention and control, air pollution prevention and control, solid waste treatment and recycling.
In terms of the new material industry, Konka has expanded the business scope of its Jiangxi Konka New Material Technology Co., Ltd. and expanded its third-generation nanocrystalline stone materials to medical, aerospace, military and other fields for promotion and landing.
The real "highlight" is also the "finale project", which is the expansion of the semiconductor business. Or because it has a certain connection with the color TV display business that Konka relied on, therefore, as an important part of the expansion of "related diversification", Konka vows to develop into a vertical integration service provider of semiconductor components and intelligent solutions, and through 5 to 10 years of efforts, it has become one of the top ten semiconductor companies in the country, and has set a "military order" with an annual revenue of more than 10 billion.
It can be said that since 2017, Konka has gone all the way, and its keywords have never bypassed expansion, diversification, and using investment and other "weapons" to "expand" the business in "unfamiliar areas". For example, in recent years, Konka has also "fallen" in the fields of big health, big data, Internet of Things, 5G and other major "gold rushes".
If from 2017 to 2022 it was Konka's diversified expansion, then in 2023, Konka's management, represented by Zhou Bin, will begin to "expand scientifically", or "strategically shrink". According to the official statement in Konka's 2023 annual report, "In 2023, the company will implement the new development framework of 'one axis, two wheels and three drives', fully implement lean management, carry out in-depth special actions such as asset revitalization, cost control and efficiency improvement, legal person pressure reduction, cost reduction and profit increase, and reorganize the business layout through organizational structure adjustment, business subject optimization and other forms, optimize resources to focus on the two main businesses of consumer electronics and semiconductors, and lay the foundation for the company's next high-quality development." ”
In short, Konka needs to transform from doing everything to "focused" business development. However, the specific performance of the "consumer electronics and semiconductors" and other businesses that are defined as the main business by Konka, the revenue and other data in the financial report are enough to corroborate. Although Konka has never used "blind expansion" as the reason for the sharp decline and consecutive losses in profits, whether it is to say that it will expand, become bigger, or shrink to "focus" in 2023, Konka's "predicament" may be related to whether the seed of "blind expansion" has achieved the expectation of "planting beans and getting beans".
03
Replace "blind expansion" with "focus", what is the chance of Konka's "new main business" "turning around"?
When Liu Fengxi even said in front of the media that he would expand and expand the investment business, when the new president Zhou Bin quickly offered the "three axes" (diversified business directions) ...... to expand and expand, then, the "real money" was spent, but now in exchange for Konka's revenue plummeted, and the net profit after deducting non-profits was lost, even the financial report in the first quarter of this year was not "good-looking", I can't help but ask, who will "pay" for this?
To some extent, the inquiry letter from the Shenzhen Stock Exchange came at the right time. Although Konka only issued the "Shenzhen Konka A: Announcement on the Reply to the Inquiry Letter of the Shenzhen Stock Exchange's 2023 Annual Report" on May 10, the replies to the "soul torture" of the Shenzhen Stock Exchange must be the result of repeated deliberation by Konka Group executives.
In the face of the inquiry of the Shenzhen Stock Exchange, if it can be regarded as a "reflection" on the group's own diversified expansion and development for so many years, it can also be regarded as the "good intentions" of the regulatory authorities. After all, including the Shenzhen Stock Exchange and investors, they all want to see Konka "rise again".
However, as early as 2017, Konka Group, which chose "no longer just a color TV company", relied on what "real skills" did it rely on in its "two main businesses of consumer electronics and semiconductors" to achieve high-quality development? After all, only by doing this can we really boost the confidence of the capital market in Konka, and can we really help Konka get out of the current predicament.
Specifically, "one axle, two wheels and three drives", as a new corporate strategy released by Konka last year, is actually to take electronic technology as the main axis of development, consumer electronics and semiconductors as the development support, and product-driven, manufacturing-driven, and international drives as the main engines. Among them, consumer electronics focuses on major categories such as color TVs, refrigerators, air conditioners, washing machines, and kitchen appliances; Semiconductors focus on optoelectronic display, storage and printed circuit board products.
In this regard, consumer electronics belongs to Konka's "old main business", that is, the home appliance sector, for Konka, or "eating ginger or old spicy". However, the semiconductor business is a high-tech business field that requires huge investment in R&D, and without the long-term accumulation of relevant technical strength, it is difficult to make achievements in a short period of time, let alone help Konka's revenue and net profit.
Source: Konka's 2023 annual report
Judging from the revenue data of Konka's "main business" of consumer electronics and semiconductors in 2023, its development performance is not satisfactory. On the one hand, although the proportion of revenue of consumer electronics has increased, the scale of revenue is actually shrinking compared with the same period in 2022. On the other hand, the revenue performance of the semiconductor business is more difficult to "add points" to it. Even, due to the revenue of 3.397 billion yuan of this business, it is equivalent to a year-on-year plunge of 67.37%, and the proportion of revenue has also decreased from 35.16% in 2022 to 19.03%.
From this point of view, in order to get out of the "embarrassing" development situation brought into by "blind expansion", Konka not only needs to improve the revenue scale of its consumer electronics business, but also needs to benchmark the world-class semiconductor companies from the technical level, and quickly develop and launch high-performance, cost-effective "replacement" semiconductor solutions.
What makes people "sweat" for Konka is that because the semiconductor field requires huge R&D investment to make certain achievements, which is bound to require a higher R&D budget.
According to the 2023 annual report, Konka's R&D expenses for the year were only 498 million yuan, compared with 543.9 million yuan in the previous year, and its R&D expense ratio was only 2.79%.
"No contrast, no 'harm'". Taking its home appliance industry as an example, TCL Electronics' R&D investment in the same period was 2.327 billion yuan, and the expense ratio was 2.94%; Although Skyworth's R&D investment is a little less than TCL's, at 2.127 billion yuan, it has reached 3.08% in terms of R&D expense ratio.
From this point of view, in 2023, Konka, which focuses on the two main businesses of consumer electronics and semiconductors, not only is these two business data not "good-looking", but also includes environmental protection and new materials, as well as other industries that Konka has "blindly expanded" in the past few years, and the revenue data is even more "ugly", and it is not an exaggeration to describe it as a "rout of the whole army".
In such a situation, Konka not only lacks "hematopoietic ability", but also encounters "high pressure" financial problems, in such a situation, what does Konka do like other international semiconductor "big players" to "burn money" to do research and development, innovation? The consumer electronics defined by Konka is just a subdivision of household appliances that have mostly entered the stock era,These markets are highly competitive、The increase in revenue is not large,It is difficult to "supply blood" for Konka's semiconductor business,It is also difficult to be like Konka color TV share ranked first many years ago,You can single-handed"Beam。
Of course, being able to actively shrink the "front" itself is a rational "stop-loss" strategy, but whether Konka can achieve a "turnaround" by focusing on "consumer electronics and semiconductors", we can only wait and see.