Main points of investment:
Acquisition of Changshu Yabang, test the waters to expand the military industry company recently announced that the transaction price of 176 million yuan to buy 100% stake in Changshu Yabang. Changshu Yabang is a military equipment supporting enterprise, mainly engaged in the research, development, production and sales of electronic control system and training simulator of military engineering equipment (pontoon bridge). Electronic control system and training simulator are the core links and important supporting equipment of military engineering equipment (pontoon bridge) operation. At present, the above main products of Changshu Yabang have been finalized through design and have the conditions and ability to supply the military in batches. The acquisition of Changshu Yabang is an important attempt for the company to move from traditional smoke detection and sensing to the military industry. it is also a major extension of the downstream application field.
With high competition barriers in the military industry and steady performance growth in Asia, the electronic control system of military engineering equipment is the core supporting of boat and bridge equipment. due to the difficulty in technical research and development, strict qualification examination and approval, and long procurement decision-making cycle, as well as the military's stickiness to existing suppliers and other reasons, the military emergency traffic engineering equipment industry presents high barriers to entry. As an important supplier of Boat Bridge Electronic Control system in East China, Yabang has a steady and flexible market growth in the future. Yabang has promised that the net profit of deducting non-return in 2016, 2017 and 2018 will not be less than 1150, 1500 and 17.75 million yuan respectively.
The development of traditional areas is limited, and the development of new business in new areas is imperative. The original main business of optical technology is based on gas, soot concentration and flow composition monitoring system engineering, the main customers are large and medium-sized coal mines and thermal power manufacturers. As the original business is limited by the downstream coal industry affected by the national supply-side reform to eliminate production capacity, the growth shrinks. From the perspective of corporate growth, it is imperative to make use of the platform advantages of listed companies to actively seek high-quality target companies or teams for M & An and introduction around the long and downstream industrial chain. After the completion of the acquisition of Asia, the shares held by the actual controllers and actors of Guangli are still more than 50%, and the shares of the management of the company still have considerable room for dilution, which may be expected to further expand new business areas in the future.
Profit forecast and investment rating: maintain the overweight rating. In view of the depressed prosperity of the coal industry and the operations and orders of listed companies in the first three quarters, we judge that the company's sales in the traditional coal field may still decline slightly, but it is worth noting that the company's sales proportion of new products such as power safety production and flue gas monitoring began to increase gradually this year, and the successful development in this field has brought new growth space for the company. Changshu Asia's committed net profit for 2016-2018 is not less than 1150 yuan, 1500 yuan and 17.75 million yuan respectively, and the acquisition is expected to be completed in mid-2017, so it will not affect the company's actual profits in 2016. it is estimated that the test preparation net profit from 2016 to 2018 will be about 2300, 4950 and 74.2 million yuan. If the impact of acquisitions on performance is not considered for the time being, the company's net profit in 2016-2018 is expected to be 2300, 3450, 56.7 million yuan, corresponding to the current market capitalization of about 178,119,73 times. Taking into account the military industrial attributes of Changshu and the small market capitalization of the company, the market should give the company a certain valuation premium after this resumption, based on our previous judgment of the company's extension growth, continue to maintain the company's "overweight" rating.
Risk hints: 1) the risk of whether the follow-up audit link of Changshu Yabang acquisition can be passed smoothly; 2) the risk that Changshu Yabang's commitment performance does not meet expectations; 3) the risk that the prosperity of the coal industry continues to decline.