The current situation of the company
Century Ruier announced on March 20 that it intends to acquire 100% stake in Beihai Telecom, paying a consideration of 568 million yuan, of which 159 million yuan is paid in cash and 410 million yuan is paid in the form of shares.
Comment
The acquisition consideration is reasonable, the performance commitment is growing rapidly, and the thickening performance is remarkable. The trading consideration of the underlying company is 568 million yuan, corresponding to the 2017 dynamic PPPUBE 14.2x, the valuation is reasonable.
At the same time, the company promises to achieve net profit of 40 million yuan / 50 million yuan / 61 million yuan in 2019, with an average annual compound growth rate of 23%. We expect the EPS of listed companies to increase by 18% in 2017 after the transaction. Looking forward, considering that the underlying company's orders in hand reached 190 million yuan by the end of 2016, and the company's strong profitability, the gross profit margin / net profit margin in 2016 was 49% / 17% respectively, we believe that the company can fulfill its performance commitment.
The target company is mainly engaged in urban rail and railway information system, and the synergistic effect with listed companies is very significant. Beihai Telecom is one of the earliest enterprises in China to develop, produce and sell rail transit information systems, with the city taking the lead. Its main products include passenger information systems and public address systems, accounting for 76.7% and 17.2% of revenue in the first ten months of 2016, respectively. The company's downstream customers include vehicle manufacturers, rail transit system integrators, subway companies and local railway bureaus under the vehicle enterprise. at present, the company has entered the list of qualified suppliers of major vehicle manufacturers, and has established a good long-term cooperative relationship with downstream customers. Considering that the main business area of listed companies is the railway traffic safety market, through this transaction, listed companies can quickly cut into the urban rail information market, and achieve the sharing of customer resources and the expansion of product lines. In addition, the listed companies plan to participate in the bidding of the urban rail information integration project as a system integrator after this transaction, so as to drive the product sales of Beihai Communications and improve its gross profit level.
The main industry is temporarily affected by the decline in the mileage of the completion of the national railway, and the urban rail market is expected to develop after the completion of the transaction.
Due to the decrease in the number of new projects started by Murray in 2011, the mileage of national railway completion fell by 66% in 2016 or continued to decline in 2017. Considering that the railway traffic safety monitoring system is highly related to the mileage of railway completion, the company's main business may be under pressure. But in the long run, we expect railway construction to remain high, and the mileage to be completed in 2018 is expected to pick up at the bottom. In addition, we expect the growth of urban subway during the 13th five-year Plan period, and the total investment is expected to reach 3 trillion yuan. After the completion of this transaction, the company's penetration in the urban rail will be greatly increased.
Valuation proposal
Temporarily maintain the profit forecast and target price, maintain the neutral rating.
Risk.
It's risky to buy.
