Event
The company issued an announcement on December 25, 2016. Recently, the merger and reorganization Review Committee of listed companies of the China Securities Regulatory Commission examined the issue of shares, asset purchases and related transactions, and the results were approved unconditionally. Upon application to the Shenzhen Stock Exchange, the company's shares have resumed trading since the opening of the market on December 26.
Analysis of key points
Further acquisition of ARC Group assets: the company intends to issue 480 million shares (offering price of 5.91 yuan per share, consideration 2.85 billion) to Tibet Bank billion to acquire ARC Group assets, which has been approved by the Development and examination Commission, and the follow-up documents need formal approval from the Securities Regulatory Commission. ARC Group's products are mainly airbag gas generators, with an on-hand and intended contract value of 3.13 billion, 3.87 billion and 4.12 billion in 2017, 2018 and 2019, respectively, and expected operating revenue of 2.75 billion, 3.24 billion and 3.64 billion, respectively. From the perspective of market and policy environment, ARC Group products are mainly sold to developed countries such as the United States and South Korea and developing countries such as China and Mexico, with relatively stable economic, policy and tax policies. In addition, Tibet Yinyi has made a promise of 1.7,2.6 and 330 million yuan in after-tax net profit for the target company's performance in the next three years.
Actively replenish Ningbo land reserve: the company announced on December 17, 2016 that it intends to acquire a 51% stake in Ningbo Yinxing Wanli with a consideration of 340 million. The project company of Ningbo Yinxing Wanli Holdings (67%) owns a project site on the south side of Ningbo Yinzhou Wetland Park, with a total construction area of 129000 square meters (the floor price is about 7752 yuan per square meter). After the completion of the acquisition, Ningbo Yinxing Wanli entered the scope of consolidated statements of listed companies. In addition, on November 10, 2016, the company won the Ningbo Yinzhou residential commercial land for 880 million yuan, with a capacity of about 163, 000 square meters (the average floor price is only 5412 yuan per square meter). With reference to the current average housing price in Ningbo, the floor cost of replenishing the land reserve is within a reasonable range.
There is a basis for the continued transformation of fundamentals: in the first three quarters of this year, the company achieved operating income of 5.17 billion, an increase of 30.9%, and a net profit of 530 million, an increase of 49.9% over the same period last year. At the end of the third quarter, the company held 4.5 billion monetary funds, an increase of 98 per cent from the beginning of the year. The company's current projects in Shanghai are also available for sale, and cash rebates are expected to continue to improve. In addition, the company completed the purchase of the first phase of the employee stock ownership plan in May this year, totaling 280 million yuan (the average price is 9.67 yuan per share, the total number of shares is about 29 million).
Investment suggestion
We expect the company to achieve EPS of 0.27,0.32 and 0.34 yuan respectively from 2016 to 2018, and the current stock price is 38X for 16-year Pamp E. We maintain a "buy" investment rating.
Risk hint
Next year, real estate sales are lower than expected, and the progress of follow-up acquisitions is slow.