Main points:
The toy business receives a "two-child" dividend. In recent years, due to the impact of rising costs and the popularity of smart phones and other smart mobile terminals, the domestic toy industry has shown a trend of slow growth, but in the next few years, the domestic toy industry will usher in the dividend of the "two-child" policy. In 2015, the main business income of the domestic toy industry was 210.68 billion yuan, an increase of 7.2% over the same period last year.
After the implementation of the comprehensive two-child policy in 2016, it is estimated that by 2020, the number of new births due to policy factors will increase by more than 3 million a year, an increase of about 20% over 2015.
The accelerated growth of the number of newborn babies will promote the growth of consumption in the toy market. Qunxing toys account for nearly 60% of the domestic market revenue, based on which it is estimated that the "two-child" dividend will drive the company's operating income growth of more than 10%.
It is proposed to acquire Sanzhou Nuclear Energy to create the second main business of "nuclear power + military industry". ① acquisition plan: the company intends to issue shares to acquire 100% equity in Sangzhou Nuclear Power, and the transaction price of the underlying assets is 1.6 billion yuan; ② supporting financing: to raise 813.96 million yuan from eight qualified investors, including Sanzhou Special Management, Zhongguang Nuclear Capital and National Nuclear Fuying. China Nuclear Power Corporation, China Guangzhou Nuclear Power Corporation and SPIC, the three major nuclear power groups in China, indirectly participated in this transaction or supporting financing. After the completion of the reorganization, Sanzhou Nuclear Power has an inherent advantage in obtaining orders. ③ profit commitment: Sanzhou Special Management and Huaxia Life undertakes that the net profit belonging to the owner of the parent company for the three years 2016-2018 is not less than 121 million yuan, 193 million yuan and 282 million yuan respectively, and the total profit for three years is not less than 596 million yuan, and not lower than the profit forecast determined in the evaluation report.
There is a huge space for the nuclear power market and a high growth in military orders. During the 13th five-year Plan period, the construction of at least seven nuclear power units will be started each year, and the average annual demand for nuclear power equipment will exceed 56 billion yuan.
In addition, under the guidance of the "Belt and Road Initiative" strategy, nuclear power equipment is likely to make breakthroughs in overseas orders ahead of nuclear power technology in the future. Judging from the acceptance of military orders by Sanzhou Nuclear Energy, the demand for high-quality special pipes and pipe fittings in the military market is also growing rapidly, and the market is expected to grow at an annual rate of 30% and 40%. In the next few years, various large equipment demand industries, especially nuclear power and military industries, will play a huge role in the development of large forgings industry.
The core competitiveness of Sanzhou nuclear power is outstanding. Sanzhou Nuclear Power has created "four domestic firsts" in the industry, undertaking nearly 60% of the main pipeline orders for domestic second-generation and second-and-a-half nuclear reactors, and has successfully delivered 15 sets of nuclear island main pipelines (including prefabricated). And provide pipe spare parts for domestic nuclear power plants for a long time. At present, the third generation technology of nuclear power is being developed, and great progress has been made, which provides technical support for the follow-up development.
Investment advice:
We expect the net profit of the company's toy business from 2016 to 2017 to be 25.36 million yuan and 26.86 million yuan respectively. We give the toy business 70 times the net profit in 2016, corresponding to the market capitalization of 1.775 billion yuan. Sanzhou Nuclear Power promised a net profit of 121 million yuan in 2016. The current median value of the nuclear power industry is 69.46 times, and the corresponding market capitalization is 7.865 billion yuan. Taken into account, after the completion of the acquisition of Sangzhou Nuclear Power, the reasonable market value of the company has reached 9.64 billion yuan, and the current market value is 6.785 billion yuan. The company's valuation still has a lot of room to rise, and we give it a "buy" investment rating for the first time.
Risk Tips:
The Sanzhou nuclear acquisition was not approved; the "two-child" policy had a lower-than-expected impact on the toy business.