Event

The company intends to acquire 100% of the equity of Jiangsu Alpha Pharmaceutical Co., Ltd., and a fire broke out in the target company in March 2016. According to the operation of the target company as of the third quarter, it will take time for the production and operation of the target company to resume. In order to protect the interests of the company and the majority of medium and small investors, all parties agreed to terminate this major asset restructuring.

The purpose of this major asset restructuring is to safeguard the interests of the company and its minority shareholders.

The major asset restructuring plan was announced on July 2, 2016, and then partially revised on July 16. The company intends to purchase its 100% equity interest in Alpha Pharmaceutical Company from specific targets Shi Zhenxiang, Dinglijiayi, Chen Benshun, Shi Liping, Shi Lijun, Suqian Puhui, Yin Xiaolong, Wan Xinqiang and Suqian Puhui by issuing shares and paying cash. Alpha Pharmaceutical 100% equity price is 1.122 billion yuan. Among them: 55.64% of the transaction consideration is paid by issuing shares, totaling 624 million yuan Pay 44.36% of the consideration of the transaction in cash, totaling 498 million yuan. At the same time, it is proposed to raise supporting funds for non-public offerings of shares to no more than 10 specific objects, including Nantong production control, with a total amount of no more than 555 million yuan and no more than 100 million yuan subscribed by Nantong production control. Alpha Pharmaceutical has promised that the net profit for 2016,2017 and 2018 will not be less than 70.5 million yuan, 97 million yuan and 131 million yuan respectively. Due to the serious fire, it is difficult to realize the performance promise, so this major asset restructuring is terminated.

Profit forecast and investment advice

The company's industrial strategic layout of "one main body and two wings" remains unchanged, and we will start extension acquisitions when the time is ripe. We predict that earnings per share from 2016 to 2018 will be 0.41,0.54 and 0.67 yuan respectively, corresponding to 57 times, 43 times and 35 times of PE, respectively, and continue to give "recommended" ratings.

Risk hint

(1) the risk of extension M & A, (2) the risk of rising cost of raw materials, (3) drug safety events, etc.