As of February 13,Sichuan Changhong has made headlines by officially integrating its AI television with DeepSeek,a notable advancement in the tech landscape.This remarkable AI TV has introduced two distinct operational modes: "Deep Thinking (Full Power R1)" and "Fast Response." This innovation marks the debut of the world's first AI TV capable of profound analytical thinking,suggesting that Changhong is striving to reclaim its share of the market that has seen fierce competition in recent years.

Following this announcement,the stock of Sichuan Changhong hit its limit-up threshold,exhibiting a remarkable surge in investor confidence.Not long ago,the company's market capitalization soared back to record heights.Just in October,the once-dominant TV manufacturer saw its stock price skyrocket by an extraordinary 178% in a single month,capped by an impressive eleven consecutive trading days of gains—a phenomenon unprecedented in the company’s 30-year history.

However,while this resurgence is notable,it’s crucial to recognize that the peak Changhong has reached now pales in comparison to the industry’s leading players.To contextualize this,we must travel back to the 1990s,a period before the emergence of tech giants like Huawei and the early stirrings of the internet age.At that time,the Chinese economy’s most lucrative sector revolved around household appliances,particularly televisions.

In 1998,China's annual television production hit an impressive 35.13 million units,establishing the nation as the world’s leading manufacturer of television sets.Television sales accounted for about 1% of China's GDP,making it a pivotal pillar of the national economy.It was during this flourishing period for the television industry that Sichuan Changhong reigned supreme.

Under the visionary leadership of Ni Runfeng,Changhong surpassed all international brands and claimed the title of China’s best-selling color television manufacturer as early as 1990.For the next twenty years,Changhong continued to dominate the market,capturing a market share that sometimes surpassed 35%.

The company recorded a staggering net profit of 2.612 billion yuan in 1997,earning the distinction of being the most profitable company on the A-share market at the time.Such profitability placed it ahead of its closest competitor,Baosteel,which reported a net profit of 2.25 billion yuan for that year.The company’s financial success allowed Changhong to ascend to the top of the A-share market capitalization leaderboard and be recognized as a genuine blue-chip stock.

However,the dawn of the 21st century brought rapid economic transformation to China.Industries such as real estate,technology,and renewable energy flourished,leading to a noticeable decline in the once-thriving television sector.Now,the significance of television manufacturing within the national economy has diminished significantly compared to its prominence over two decades ago.

By the midway point of 2024,data revealed a disheartening trend for the television market in mainland China,with brand shipments plummeting to 16.39 million units—a 4.2% decrease from the previous year,marking the lowest point in a decade.This figure is less than half of that experienced in 1998,while the television industry's production and sales now account for merely 0.02% of GDP.

Amidst this downward trajectory,Sichuan Changhong experienced setbacks due to poor decision-making during its business dealings.For instance,the company suffered a staggering loss of 3.681 billion yuan in 2004 due to bad debts incurred from collaborating with APEX.Additionally,the company misjudged market trends with plasma televisions,leading to another major loss of 1.976 billion yuan in 2015.Recent statistics indicate that its television sales have been surpassed by competitors like Hisense and Xiaomi,resulting in a slip to a fifth-place ranking in the industry,with a currently estimated market share falling below 10%.

Once the darling of A-share investors,Changhong’s resurgence helped it regain some market capital,but when compared to A-share giants boasting market caps upwards of a trillion yuan,it appears relatively insignificant.Even Gree Electric Appliances,with a market capitalization a mere tenth of Changhong’s back in the day,now stands at over 240 billion yuan—over three times Changhong's current valuation—having increased by more than thirty times since 1998.

In terms of profitability,Changhong’s financial standing starkly contrasts with today's corporate titans.In 2023,the company reported a net profit of 688 million yuan,which is less than one-third of its peak earnings.Comparatively,the state's banking behemoths report net profits exceeding one hundred billion yuan,while new market leaders such as Kweichow Moutai and CATL report profits in the hundreds of billions,far surpassing the once-leading profitability of Sichuan Changhong.Notably,Gree Electric,which had previously netted only one-tenth of Changhong's profit,achieved a net profit in excess of forty times that of Changhong in 2023.

In response to the shifting tides of the industry,Sichuan Changhong has initiated a diversification strategy,evolving into a company that is no longer solely defined by its television business.

The latest mid-year report of 2024 indicated that revenue from televisions contributed 7.7 billion yuan to Changhong’s total,accounting for a mere 14% of overall earnings; in stark contrast,the television segment used to represent over 80% of the company’s total revenue two decades earlier.

In recognition of the decline in its television business,Changhong has pushed forward with its diversification efforts.Over the past twenty years,the company has ventured broadly,attempting to capitalize on various trends from real estate and logistics to artificial intelligence and emerging low-altitude economic opportunities.Analysis from Tonghuashun disclosed that Changhong is engaged in a staggering 56 diverse business concepts,ranking it fifth among A-share companies.

Currently,the largest revenue source for Changhong is its IT products and services division,which recognized 17.7 billion yuan in revenue during the first half of 2024—a year-on-year increase of approximately 16.31%.This segment has now surpassed its traditional television business,becoming the primary driver of revenue growth for the company.

After many trials and tribulations,Changhong's operational metrics have displayed improvements in recent years.Between 2020 and 2023,the company’s profitability soared dramatically,recording a tenfold increase in net profits.The 688 million yuan reported in 2023,while not on par with peak years,marks the highest profit the company has seen in 25 years.

Perhaps investors are beginning to recognize the beneficial changes stemming from Changhong's diversification,as its stock has performed robustly in recent years.In 2023,the stock price surged by 105%,reflecting a staggering increase of over seven times its lowest point in two years,positioning it among the best-performing stocks on the A-share market.

Nonetheless,it is essential to consider the cost of this diversification,which has often been overlooked.As the industry labels become increasingly nebulous,Changhong has started to appear subdued within its operational pursuits.

During its peak in 1998,Sichuan Changhong presented a fundamentally distinct operational profile,boasting comprehensive gross margins of 27.6%.Its substantial influence within the television market enabled the company to secure exceptionally high profits.

In contrast,the vastly diversified Changhong of 2023 faces a notable decline in gross margins,now sitting at 11.54%.The leading segment,IT products and services,merely achieves a gross margin of 3.7%.Although revenues have increased more than fivefold compared to two decades past,the profit levels achieved today simply cannot match the figures from that era.

As a former heavyweight in the A-share market,Sichuan Changhong evidently requires more demonstrative profitability metrics to re-establish its value in the eyes of today’s investors.