What is controversial in the market is that non-recurring gains and losses have become an important magic weapon for Furi Electronics to dress up its performance. Since the 2012 interim report, Furi Electronics' net profits attributable to shareholders of the parent company have all been profitable, but after deducting non-recurring gains and losses, all net profits have been losses.
It is worth noting that on the one hand, Furi Electronics continues to sell off its assets to improve its performance; on the other hand, it is frantically acquiring diversified assets without doing its job. In the past two years, it has successively acquired two failed IPO companies. Among them, high premium acquisitions and unclear prospects for integration benefits have been questioned.
The industry is "confused"
Starting from the 2011 mid-term report, Furi Electronics' investment income suddenly increased sharply, and the company relied on investment income to maintain its performance.
According to the 2011 interim report, Furi Electronics’ investment income was 152 million yuan, accounting for 130% of net profit; from 2011 to 2012, the company’s investment income was 189 million yuan and 100 million yuan respectively, accounting for 255% and 263% of the current net profit respectively.
The most recent sale of investment assets was an announcement issued by Furi Electronics on January 3 this year, stating that as of the close of trading on December 31, 2013, the company had sold a total of 10 million shares of Huaying Technology, accounting for 1.43% of the company's total share capital. After this reduction, the company still holds 16.16091 million shares of Huaying Technology, accounting for 2.31% of the company's total share capital. According to preliminary calculations, by reducing its holdings of 10 million shares of Huaying Technology this time, the company can obtain an investment income of 205.5702 million yuan after deducting costs and related transaction taxes.
In stark contrast, it can be seen from the main business that 87% of the company's revenue comes from trade with a gross profit margin of only 1.19%.
In order to reverse this situation, Furi Electronics has continuously implemented an extensional acquisition policy in recent years. According to public information, since 2012, Furi Electronics has transformed from a single industry to diversified mergers and acquisitions, focusing on three major industries: LED optoelectronics and green energy and environmental protection industries, smart home appliances and communication products, and domestic and foreign trade.
In 2012, Furi Electronics acquired a 51% stake in Blueprint Energy Saving and officially entered the field of industrial energy conservation.
At the end of September 2012, Furi Electronics acquired 51% of the equity of Meiyu New Technology (Shenzhen) Co., Ltd. and changed its name to Furi Umi, thus further expanding the mobile communications industry. In 2013, the company developed the Furi smartphone based on Samsung's Exynos platform. In July 2014, it acquired mobile communications manufacturer Zhongnuo Communications for 800 million yuan.
In 2013, we acquired 51% of the equity of a friendly company and entered the field of green building.
In 2013, Furi Electronics got involved in the LED optoelectronics industry and completed the acquisition of 92.80% equity of Shenzhen Marui Optoelectronics and 20% equity of Cross-Strait Lighting, which enhanced the scale of the LED industry and improved the company's LED industry chain.
However, Furi Electronics' "not doing business"-style acquisitions have been controversial in the market - such a "hodgepodge" type of mergers and acquisitions did not give Furi Electronics generous returns. Instead, it brought tight capital chains, high debt ratios, and the company's reliance on handling its assets to maintain profitability.
Therefore, non-recurring gains and losses have become an important magic weapon for Furi Electronics to dress up its performance. Since the 2012 interim report, Furi Electronics' net profits attributable to shareholders of the parent company have all been profitable, but after deducting non-recurring gains and losses, all net profits have been losses.
High premium acquisition of "professional households"
What makes the market even more suspicious is the high premium acquisition of Furi Electronics.
On July 31, Furi Electronics announced its restructuring plan. The company plans to acquire 100% of the equity of Zhongnuo Communications at a price of 800 million yuan. At the same time, the company plans to use the inquiry method to raise supporting funds from non-public issuance of stocks to no more than 10 (inclusive) qualified specific targets. The total amount is expected to not exceed 220 million yuan.
In this transaction, the estimated value of 100% equity of Zhongnuo Communication was 814 million yuan, the value-added rate reached 137.97%, and the final confirmed transaction price was 800 million yuan.
In addition, Xantong Antian’s high-valuation acquisition is also worthy of attention.
In March 2014, Zhongnuo Communications acquired Xantong Antian for 105 million yuan. According to the appraisal report, the book value of Xuntong Antian's net assets on the appraisal base date (i.e., December 31, 2013) was 25.0251 million yuan, the appraised value was 105.0172 million yuan, the appraised value added was 79.9921 million yuan, and the appreciation rate was 319.65%.
During the acquisition of Furi Electronics in July this year, its valuation rose again.
What is puzzling is that the acquisition evaluation report of Furi Electronics also "exactly" ended in March this year. According to the announcement, as of March 31, 2014, the assessed value of Xuntong Antian increased by 54% again, reaching 162 million yuan.
Coincidentally, in the LED optoelectronics industry. In 2013, the company completed an investment of 195 million yuan to acquire 92.80% equity of Marui Optoelectronics.
In fact, Furi Electronics, whose main business is in the doldrums, wants to introduce external assets to get out of trouble by acquiring Marui Optoelectronics, a company that failed in its IPO. However, the market is also questioning this - the acquisition price is too high.
The capital for the acquisition of Marui Optoelectronics was nearly 200 million yuan, while its corresponding net assets were only 50.0439 million yuan, a premium of 4 times.
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