Konka, the "first brother of color TV" 30 years ago, handed over a report card that surprised the outside world. On March 29, Konka released its annual report for 2021. According to the financial report, the company achieved a revenue of 49.107 billion yuan in 2021, a year-on-year decrease of 2.47%; The net profit attributable to shareholders of listed companies after deducting non recurring profits and losses was -3.251 billion yuan, compared with -2.368 billion yuan in the same period of last year, and the loss expanded significantly. "Bullet financial view" noted that as of the close of the disclosure day of this annual report, Konka's share price was reported at 5.14 yuan / share, down 2.10% from the previous trading day. Since then, the share price has not improved much. As of the closing on April 18, Konka's share price reported 5.04 yuan / share, with a total market value of 12.136 billion yuan. As a color TV giant with unique scenery, what happened behind the double decline of Konka's revenue and profit? Why did 42 year old Konka fall into the dilemma of "midlife crisis"? In the increasingly fierce competition in the home appliance market, how many chances does it have to win? 1. Former "color TV brother" Looking back on Konka's 42 year development history, it has had a quite long glorious period. Konka, founded in 1980, initially started with the production of electronic products such as tape recorders and stereos. It is the first Sino foreign joint venture electronic enterprise in China and the first industrial enterprise with an output value of more than 10 billion in Shenzhen. It has ranked first in domestic color TV sales for five consecutive years and become the "first brother of color TV" in China. In 1992, Konka A and B shares were listed on Shenzhen Stock Exchange, which has experienced 30 years of ups and downs in the stock market. In recent years, with the changes of consumption trends at home and abroad and the increasingly fierce market competition, Konka is also seeking transformation. Previously, Konka adopted a diversified operation, operating products in up to 20 categories, with great blindness. After that, the company focused on the color TV industry and made great achievements and development. When the competition pattern of color TV industry is not optimistic, Konka has transformed again to diversified operation. In 2017, Konka said: "Konka is not just a color TV enterprise in the future." Today, Konka's business covers smart home, new energy, new materials, great health, aiot, industrial parks, environmental protection, semiconductors and many other fields. Objectively speaking, Konka's diversification strategy has achieved certain results. Take the newly expanded semiconductor business for example. According to the financial report, the revenue of Konka semiconductor business reached 322 million yuan in 2021, an increase of 13.78% over 283 million yuan in the same period of last year. The proportion of revenue contributed by this business to the company increased from 0.56% in 2020 to 0.66% in 2021. In addition to the effectiveness of new business, Konka's marketing expense rate continues to be low. According to the financial report information disclosed by Konka, the company's marketing expense rate (marketing expense rate = marketing expense / revenue * 100%) has been maintained between 2% and 7% in the last five years, at a very low level. Moreover, Konka's marketing expense rate is decreasing year by year, which are 6.86%, 4.95%, 4.18%, 3.63% and 2.91% respectively. In addition, the net cash flow from Konka's operating activities is also increasing. According to the published financial reports, in the past five years, the net cash flow from Konka's operating activities has increased from -4.314 billion yuan in 2017 to 809 million yuan in 2021. The growth rate of net cash flow from Konka's operating activities is also accelerating, rising from - 343.79% in 2017 to 352.79% in 2021, with an average annual growth rate of nearly 40% to 39.58%. From the above data, Konka's overall performance in the past five years is commendable, but if we carefully study the financial results, it is not difficult to find the growth dilemma it is facing. 2. Weak revenue growth "Bullet financial view" found that the former home appliance giants could not escape the "middle-aged crisis" by reading Konka's financial reports over the years. For example, Konka's revenue growth slowed down as a whole. According to Konka's previously released financial report, in the last five years, the company's revenue growth rate has dropped from 53.84% in 2017 to a negative value of - 8.65% in 2020, and this negative growth trend has continued in 2021, which is - 2.47%. "Bullet financial view" believes that the main reasons for Konka's slowdown in revenue growth are as follows: First, Konka's color TV business revenue has declined year after year. According to Konka's previous financial reports, in the past eight years, the company's color TV business revenue has decreased from 14.697 billion yuan in 2014 to 7.3 billion yuan in 2021. Moreover, Konka's color TV business revenue growth has been negative, reaching the highest of - 0.89% in 2016 and the lowest of - 17.53% in 2018. In addition, the proportion of revenue contributed by Konka's color TV business to the company is decreasing year by year, from 75.67% in 2014 to 14.87% in 2021, a decrease of 60.80%. However, the poor performance of color TV business is not only Konka, but also other players in the color TV industry. According to the data of ovicloud, in the last six years, the retail volume of China's color TV market reached the highest in 2016, with 50.89 million units, and the lowest in 2021, with 38.35 million units, showing an overall downward trend. In addition, the growth rate of retail sales in China's color TV market has shown an overall slowdown, from 7.77% in 2016 to - 13.82% in 2021. In fact, the overall decline of retail sales in China's color TV market has directly affected the trend of retail sales. According to ovicloud, in the past six years, the retail sales of China's color TV market has shrunk from 154.9 billion yuan in 2016 to 128.9 billion yuan in 2021. A very important reason for the overall shrinkage of China's color TV market is that China's color TV market has been highly saturated, and the sales volume mainly comes from the demand for stock replacement. Second, Konka's white electricity business revenue growth is decreasing year by year. According to Konka's previously disclosed financial report, the revenue growth of the company's white power business in the last three years was 79.97%, 0.33% and - 3.72% respectively. Third, Konka's industrial and trade business revenue growth slowed down as a whole. According to the financial report, in the past five years, the revenue growth rate of Konka's industry and trade business has plummeted from 489.03% in 2017 to - 2.63% in 2021, with a decline of 491.66%. Fourth, Konka's environmental protection business revenue has decreased year by year. According to the financial report, the revenue of Konka's environmental protection business in the last three years was 7.079 billion yuan, 4.824 billion yuan and 4.355 billion yuan respectively. Moreover, Konka's revenue growth rate of environmental protection business reached the highest in 2019, at 134.38%, and was negative in the following two years, at - 31.86% and - 9.73% respectively; In addition, the proportion of revenue contributed by Konka's environmental protection business has decreased year by year, from 12.84% in 2019 to 8.87% in 2021. Of course, Konka's weak revenue growth is also related to the cooling of the real estate market. As we all know, a large part of the demand in the home appliance market is driven by the trading volume of real estate. In recent years, the tightening of policies, the adjustment of housing loan interest rate and the strict control of illegal purchase of consumer loans have led to a certain decline in real estate trading volume. As a big player in the home appliance industry, Konka's home appliance business revenue will inevitably be affected. In addition, the weakness of consumer demand for household appliances also inhibited Konka's revenue growth. Because in addition to being affected by the epidemic, there are still some problems in the domestic household appliance industry, such as serious product homogenization and insufficient innovation. If there are not enough innovative functions or experiences, which can not give people a bright feeling, the replacement and renewal demand power of consumers is obviously insufficient. Bullet financial outlook also noted that Konka's revenue stall is also related to its declining reputation. On the black cat complaint platform, the total number of complaints involving Konka is up to 466, while netizens' complaints about Konka mainly include poor product quality, poor after-sales service, advertising harassment, arbitrary deduction of fees and difficulty in returning goods. The decline of word-of-mouth reputation is bound to affect the re purchase of some Konka old users, and also make some Konka intended users give up the idea of purchasing their related products. More importantly, at present, enterprises such as Xiaomi and Huawei are also producing and selling household appliances. These new brands are rising rapidly and have great advantages in function design, appearance, price and brand, which also gives consumers more choice space. Then the competitiveness of old brand products will be further weakened and the market competition situation will become more and more intense. 3. 10-year loss of more than 10 billion In addition to the slowdown in revenue growth mentioned above, Konka's deduction of non net profit is also not optimistic. We know that deducting non net profit is the financial indicator that reflects the true profitability of an enterprise. According to the financial report, Konka's non deduction net profit has been negative in the past 10 years, reaching -10.393 billion yuan. Moreover, in the last five years, Konka's non net profit deduction has been decreasing, which are -97 million yuan, - 795 million yuan, - 1.876 billion yuan, - 2.368 billion yuan and -3.251 billion yuan respectively. The reason behind this is that bullet financial view believes that, first of all, it is related to the overall rising trend of Konka's R & D expenses. According to Konka's previously released financial report, in the past five years, the company's R & D expenses have increased from 330 million yuan in 2017 to 616 million yuan in 2021. Moreover, except for the negative growth rate of R & D expenses in 2021, this value of Konka in other years is positive, with an average growth rate of 29.00%. Secondly, it is also related to the overall upward trend of Konka's management expenses. According to the financial report, Konka's management expenses have increased from 448 million yuan in 2017 to 960 million yuan in 2021 in the last five years. Moreover, except for the negative growth rate of management expenses in 2021, this value of Konka in other years is positive, with an average growth rate of 19.54%. Moreover, it is also related to the rise in the price of raw materials. As we know, the main bulk raw materials for household appliance production are steel, copper, aluminum and plastics. Among them, air conditioners, refrigerators and washing machines account for 50% - 60% of the production cost. It is understood that on March 23, 2020, the copper price of LME3 for three months was only $4601 / ton. By March 22, 2021, this value was updated to $9130 / ton, nearly doubling to 98.44%. In addition to copper prices, the prices of other raw materials of household appliances have increased significantly, and the prices of metal products such as nickel, tin and aluminum are also rising. Moreover, the rising trend of raw material prices continues. According to the data of Shanghai Nonferrous Metals network, as of March 29, the price of copper has increased by 6% since 2022, the price of aluminum has increased by 14% since 2022, and the price of stainless steel futures has increased by 18% since 2022. In addition, it is also related to the global epidemic. You know, the ups and downs of the global epidemic have led to the shortage of maritime transport capacity, which has led to a sharp rise in maritime freight rates, which is reflected in Konka, which is laying out the globalization strategy, which is a further increase in costs. In this way, Konka's profits will be diluted. Finally, it is related to the increasingly fierce market competition. Konka's main business is highly competitive, which will push up the operating costs of enterprises and thin their profit margins. In the financial report, we found that Konka's asset liability ratio is still high for a long time, in addition to its performance decline. The financial report shows that in the past 10 years, Konka's average asset liability ratio has reached 77.14%, far exceeding the recognized appropriate level of asset liability ratio (40-60%). It is worth noting that the asset liability ratio is too high, which means that the solvency of the enterprise is weak and there are large financial risks. Therefore, "how to reduce the asset liability ratio" has become a difficult problem that Konka has to face and solve. 4. Conclusion It is undeniable that in the face of the surging development wave in the past 42 years, Konka has occupied a place in the fierce industry competition through diversified layout, but Konka has inevitably entered the dilemma of "double decline in revenue and profit". Heavier