Synopsis
Qianglian Convertible Bonds will be listed on October 27 (Thursday) at a scale of 1.21 billion yuan. We think that according to current market conditions, the listing price may be around 112 yuan.
Underlying Stock Analysis
The company is engaged in R&D, production and sales of large-scale slewing bearings and industrial forgings. The products are used in the fields of wind power generation, shield machines, offshore equipment and construction machinery. Total revenue/net profit for the first three quarters of 2022 was 1,953 billion yuan (YoY +2.79%) /334 million yuan (-16.56%) respectively. 2022Q3 performance declined seriously, with a gross profit margin of 25.03% (YOY-12.1PCT), which may be a decline in the price of slewing bearing products. In recent years, the company has been deeply involved in the wind power bearing and parts market and has developed the gearbox bearing and precision parts business. We think the company's main highlights are as follows:
1) The domestic replacement process of wind power bearings has accelerated, and the company is in the leading position in the industry with years of technology accumulation and customer resource advantages: the company's products, direct-drive three-row roller wind power spindle bearings and double row tapered roller wind power spindle bearings, have all been mass-produced and supplied to downstream customers such as Mingyang Intelligent, Dongfang Electric, and Harbin Electric Wind Power. At the same time, it successfully developed large megawatt wind power spindle bearing products such as 5.5 MW and 6.25 MW to supply Mingyang Intelligent Operation in September 2022. According to the company's announcement, the company signed a large contract with Mingyang Intelligent Operation in September 2022 The contract stipulates that the transaction for the full year of 2023 will not be less than 1.32 billion yuan. The products include yacht propeller bearings, land wind main bearings, offshore model main bearings, etc.;
2) Extend the industry chain and expand the company's product layout: the subsidiary Shengjiu Forgings produces oversized forgings at a leading level, providing material guarantees for the manufacture of the company's heavy-duty slewing bearings; the subsidiary Xinsheng New Energy engages in new energy solutions for the photovoltaic industry; the subsidiary Haozhi Machinery's main products are wind power locking plates, mergers and acquisitions to expand the gearbox chain, and collaborate with this debt transfer project to achieve collaborative development of wind power bearings and wind power gearbox precision parts business.
The underlying stock was moderately valued and flexible. The stock price fell to a standstill after the publication of the three-quarter report. As of October 26, 2022, the latest P/E (TTM) of the underlying stock was 59.28x, and the latest total market value was 26.561 billion yuan. The volatility rate in the past 180 days was 68.77%, and the elasticity is strong. The underlying stock has risen rapidly since the beginning of September. After the publication of the third quarter report, trading was high today, and the stock price dived to a standstill. The ban on 130 million initial restricted shares was lifted in July 2023, accounting for 65.46% of tradable shares before the ban was lifted.
Terms and pricing
The current debt-conversion scale is moderate, debt bottom protection is strong, and the three major clauses remain in mainstream form. The current debt conversion scale was 1.21 billion yuan, the initial conversion price was 86.69 yuan, and the latest average price was about 92.93 yuan. The conversion rate is AA, with a term of 6 years. The coupon interest rate is 0.30%, 0.50%, 1.00%, 1.50%, 1.80%, and 2.00%, respectively. The maturity and redemption price is 112 yuan. The YTM corresponding to the face value is 2.71%. The debt bottom is about 94.15 yuan, and the debt base protection is strong.
At the pricing level, the company's production capacity is tight and the issuance of convertible bonds is beneficial to expanding its production capacity and increasing its market share. It is recommended to pay attention to the sales prices of supporting products and the recovery of the company's performance. The underlying stock was moderately valued and flexible. The stock price fell to a standstill after the publication of the three-quarter report. The current debt-conversion scale is moderate, debt bottom protection is strong, and the three major clauses remain in mainstream form.
Based on current market conditions, we think its listing price may be around 112 yuan.
risks
Industry competition intensifies, performance falls short of expectations, import substitution, and convertible debt default risks.