Event description
The company announces a major asset purchase report (draft) and intends to pay 816 million yuan in cash to acquire a 51% stake in Ningde Dongheng.
Event comment
Ningde Dongheng is a supplier of module structures in Ningde era. Ningde Dongheng was established in 2014, the main business is power battery precision metal structures, the main products are module side plates, module end plates, module crimping components and so on. Ningde Dongheng and its subsidiaries have qualifications such as high-tech enterprises and Fujian Province's "specialized and new" small and medium-sized enterprises; the largest customer is Ningde era (87.63% and 92.99% of revenue in 2020 and 2021, respectively). End customers include Mercedes-Benz, BMW, Tesla, Inc., Volkswagen, Toyota, Ford, NIO Inc., Changan and other mainstream car factories. Ningde Dongheng has set up production bases in Ningde, Liyang, Shanghai, Yibin and other places, and has won many certifications such as "CATL excellent supplier" and "CATL production contribution Award".
Ningde Dongheng has high performance growth and strong profitability in the past two years. The operating income of Dongheng in Ningde from 2020 to 2021 was 4.14 yuan and 904 million yuan respectively, and the revenue growth rate in 2021 was 118%. The net profit in 2021 was 0.62 yuan and 142 million yuan respectively, and the net profit growth rate in 2021 was 130%. From 2020 to 2021, Ningde Dongheng gross profit margin was 29.67% and 28.93% respectively, and the net profit rate was 14.9% and 15.7% respectively. Ningde Dongheng gross profit margin is similar to that of Xianhui technology, and its net profit rate is higher than that of Xianhui technology. Ningde Dongheng 100% equity deal is priced at 1.6 billion yuan, PE is 11.3 times based on net profit of 142 million yuan in 2021, and PE is only 10.7 times in terms of performance commitment of 150 million yuan in 2022.
Cut into the battery module structure, the synergistic effect helps the development. After the completion of the transaction, Ningde Dongheng will become Shanhui Technology holding subsidiary, and Shanhui Technology will expand from the module PACK production line to the lithium battery parts field, forming a dual main drive. In addition, Shanhui Technology is also expected to empower Ningde Dongheng through automated production lines, optimize production efficiency and enhance its profitability. The two sides can produce synergy in customer development, resource maintenance, internal production efficiency and other aspects, which is conducive to further expand the variety of products and obtain new profit growth points.
The company is expected to enter the fast lane of development. Before the deal, Shi Zenghui, Lin Chenbin and Lin Liju held 70%, 20% and 10% of Ningde Dongheng respectively. After the acquisition, Xianhui Technology will hold 51% of Ningde Dongheng and Shi Zenghui 49%. Shi Zenghui promised that the net profit of Ningde Dongheng in 2022-2024 would not be less than 1.5,1.6 and 170 million yuan. According to the financial data of 2021, before the completion of the transaction, Xianhui Technology has an operating income of 1.102 billion yuan and a net profit of 71 million yuan; if the transaction is completed, it will have an operating income of 2.006 billion yuan and a net profit of 210 million yuan. After the completion of the transaction, the company's operating income and net profit indicators increased significantly, which is conducive to improving the profitability of listed companies.
Maintain a "buy" rating. Without taking into account mergers and acquisitions, the company's net profit from 2022 to 2023 is expected to be 2.40 yuan and 410 million yuan respectively, corresponding to PE of 25 and 15 times respectively; after the completion of the cash acquisition of 51% shares, assuming that the net profit of Dongheng Machinery in 2022-2023 is the performance commitment value of 1.5 yuan and 160 million yuan, and the consolidated statement for July-December 2022, the 2022-2023 preparatory net profit is 2.8yuan and 490 million yuan respectively, and the corresponding PE is 22 and 12 times respectively. The company has a high performance-to-price ratio in the lithium power equipment sector and maintains a "buy" rating.
Risk hint
1. The sales of new energy vehicles fell short of expectations, and the expansion of battery factories fell short of expectations.
2. The company's new products and new business development are not as expected.
