Events:
The company announced on the evening of May 27th that it intends to issue no more than 180 million shares in non-public offering at a price of no less than 7.36 yuan per share, with a total offering of no more than 1.325 billion yuan, all of which will be used to acquire 100% equity in Xi'an Mengzhou and supplement the company's working capital related to the development of the film and television culture industry.
Comments:
Solid progress has been made in external expansion, and the development strategy has been gradually clarified. Xinke material's first main line of development is to make use of Guhe's technology and channel advantages to enter high-end copper processing business and enhance the profitability and market position of copper business. The main steps include the acquisition of Guhe Metal in 2010, the production of 40,000 tons of high-precision belt in 2012, and the production of high-precision tinned copper strip in April 2014. The second is emerging industries, including the acquisition of 1.6% stake in Tianjin Lishen and the acquisition of 100% stake in Xi'an Mengzhou. We expect that in the future, the company will continue to attach equal importance to both legs on the basis of the existing integrated resources, and the road of transformation will be deeper and deeper.
Xi'an Mengzhou focuses on the production of war TV series with excellent quality. Xi'an Mengzhou is a cultural and creative industry company integrating TV drama planning, production and marketing. It has invested in and produced well-known war film and television works such as "Snow Leopard", "Black Fox", "broken Sword", "Wind Shadow", "Wolf" and "Love Song". In particular, it is well-known in China, such as "Snow Leopard", with a net profit of 44 million in 2013, making it a media enterprise with better quality.
The reasonable purchase price will effectively thicken the company's performance. Xi'an Mengzhou promised that the net profit from 2014 to 2016 will be 1.0 pound 1.4 / 196 million yuan respectively. If the price is not more than 1.325 billion yuan, the corresponding PE will be less than 13-9-7 times, and the purchase price is reasonable. The profit commitment of Xi'an Mengzhou is larger than the net profit of Xinke material we predicted before (the net profit from 2014 to 2016 is 0.56max 1.01 / 175 million yuan in turn). If Dingzeng is successfully completed, it will significantly increase the performance of Xinke materials.
Maintain the overweight rating. Due to the uncertainty of the fixed increasing time point, we maintain the forecast that the EPS of Xinke material 2014-2016 is 0.09Unip 0.16 / 0.28 yuan. If the acquisition of Dingzeng is successful, according to the newly issued 180 million shares for acquisition dilution, the EPS for 2014-2016 will be 0.19amp 0.30max 0.46. We believe that the non-public additional issuance project will bring high growth after it is put into production in 2013, while the pace of extension development may continue to accelerate, but considering that the acquisition has not yet been completed, the target price will be maintained at 10.98 yuan, with 31% space, and the holding rating will be increased.
Core risk: the risk of acquisition failure.