Continued deterioration of operations *St. Kong's delisting risk has intensified

Reporter Zhang Wenjuan

On October 26, *ST King Kong disclosed that in the first three quarters of 2021, the company achieved a total operating income of about 562 million yuan, an increase of 83.55% year-on-year. The main reason was the increase in sales of the company's main products.

In terms of operating costs, the company's operating costs in the first three quarters were about 370 million yuan, an increase of 25.4% year-on-year, lower than the growth rate of 83.55% of operating income, resulting in a gross profit margin increase of 30.55 percentage points over the same period last year. The expense ratio during the period was 57.82%, down 6.23 percentage points from the same period of the previous year, and the effect of cost control was obvious.

However, in the case of a sharp increase in revenue and gross profit margin, in the first three quarters of this year, *ST King Kong achieved a net profit loss attributable to the mother of about 597 million yuan, compared with a loss of about 481 million yuan in the same period last year, and the loss margin expanded.

Ma Yisi, corporate strategist of Henan Honghu Enterprise Consulting and Management Co., Ltd., said in an interview with the Securities Daily reporter: "*ST King Kong's continuous losses in the past two years are related to the company's large number of litigation losses, asset impairment, and credit impairment losses, which will eventually erode profits. ”

In fact, a large number of lawsuits have caused a serious impact on *ST King Kong. According to the previous *ST King Kong disclosed its 2020 annual report, as of the end of 2020, *ST King Kong had accrued estimated liabilities of 3.225 billion yuan due to litigation cases, accounting for 61.14% of the total litigation involved at that time. According to this year's semi-annual report, in the first half of the year alone, the losses incurred by *ST King Kong due to litigation reached 320 million yuan, and the impairment of other assets and credit impairment losses also reached nearly 0.5 billion yuan.

"With the progress of litigation matters, some of the lost litigation cases will face large amounts of enforcement and compensation, * ST King Kong's funds, equity and other assets in the bank account may continue to be seized, frozen, deducted and other measures by the court, and some of the guaranteed executed cases * ST King Kong can be recovered from a third party there is still uncertainty, which will affect *ST King Kong profits and its subsequent continuous operation." Wang Kuixing, a lawyer at Haoyunduo Law Firm, told reporters.

However, from the data of the third quarterly report, it is found that *ST King Kong does not have the ability to continue to operate. According to the data, as of the end of the third quarter of this year, the net profit margin of *ST King Kong's sales was -106.47%; the asset-liability ratio reached 101.7%, and the net assets were about -112 million yuan, which was insolvent.

According to the "Advance Notice of Administrative Penalties and Market Prohibition" previously issued by the CSRC, *ST King Kong's net assets after retrospective adjustments on December 31, 2019 and December 31, 2020 may be negative, and if the company's net assets are still negative as of December 31, 2021, *ST King Kong will have negative net assets for three consecutive years, and its shares may be subject to major illegal forced delisting.

"Major illegal superimposed operations have deteriorated, and at present, the probability of *ST King Kong being delisted is increasing, and investors need to pay close attention to it and be fully prepared." Wang Kuixing said in this regard.

(Edited by Li Bo, Qiao Chuanchuan)