Main points of investment:
Leading daily ceramic enterprises, M & A Lianjun bigger and stronger. Guangdong Songfa Ceramics Co., Ltd. (stock code: 603268), founded in 2002, is a professional and high-quality domestic porcelain supplier integrating ceramic product design, R & D, production, sales and service. Mainly engaged in daily porcelain, fine porcelain and ceramic wine bottles and other products. The company is committed to the combination of ceramic industry and ceramic culture, has a leading position in R & D and design, and its products are sold at home and abroad. In March 2015, the company was listed on the Shanghai Stock Exchange, referred to as Songfa shares. In August 2016, the company acquired Lianjun Ceramics, a company in the same industry, expanding its scale and market competitiveness.
To launch M & A funds and continue to try mergers and acquisitions of educational targets, there are difficulties and perseverance can be seen. Since listing, the company has been actively exploring extension layout and investing in emerging industries. In August 2015, the company jointly established an industrial M & A fund with Qianhai to explore extension development with the help of a professional team. In the first half of 2016 and the first half of 2017, the company suspended trading twice and tried to acquire OneSmart International Education Group Ltd, Chuangxian Science and Education and Jin Shangqi, but finally failed to reach an agreement and failed to complete the underlying merger and acquisition. Although the company has not yet achieved a large number of mergers and acquisitions of educational assets, the persistence of continuous investment in the education industry can be seen.
Participate in enlightened master education, hold Daigo brothers, online and offline education ecology is beginning to emerge. Since 2016, the M & A Fund has held 13.98% of the shares of enlightened Master Education, a K12 educational institution in Guangdong. Master Education was listed on the third board in 2016 and made a net profit of 22.23 million yuan in 2015. The listing is terminated in May 2017. The company has formed a strong brand and good teaching effect in Guangzhou, and is now moving towards the stage of regional and product line expansion, striving to make it bigger and better. On May 25, 2017, the company announced the purchase of 51% shares of Daigo Brothers with self-raised funds, and the counterparty promised the performance of 25 million yuan, 32.5 million yuan, 42.25 million yuan and 52.25 million yuan in 2017-2020. At the same time, the counterparty will purchase no less than 30 million yuan of the company's shares within three months of receiving the first consideration. To some extent, it reflects the confidence of the team. Daigo brothers are online education live broadcast technical services and audio and video interactive live broadcast service providers of well-known Internet education platforms such as VIPKIDS. Internet education is currently in a trend of rapid development. In September and November 2016, according to VIPKIDS, its monthly sales exceeded 100 million yuan and 300 million yuan respectively. Through one parameter and one control, the company has initially formed an embryonic form of online and offline education ecology.
Investment advice. Based on the company's brand and scale advantages in the ceramic industry, the company is expected to maintain steady growth in the main ceramic industry. At the same time, since the listing, the company has tried many mergers and acquisitions in the education industry, and the persistence of the transformation and layout of the education sector can be seen. From 2016 to now, by investing in enlightened master education and Daigo brothers with significant regional or product barriers, on the one hand, they have brought positive profits and investment returns to the company, on the other hand, they also reflect the company's rigorous and responsible attitude towards education investment. Combined with the investment layout of the company, the past profit trend of the existing main business and target, and the performance commitment of the target counterparty, we estimate that the net profit from 2017 to 2019 will be 67.6 million yuan, 96.59 million yuan and 117.83 million yuan respectively, and the corresponding EPS will be 0.77 yuan, 1.10 yuan and 1.34 yuan respectively. Compared with other transitional education companies, we give Songfa shares a multiple valuation of 2018E50, corresponding to the target price of 55 yuan per share.
Risk hint. Ceramic main business is not as expected, epitaxial mergers and acquisitions are not as expected, market risk and so on.