A brief comment on asset exchange and directional additional issuance, Beijing Grain shares are about to be placed into the company recently issued a major asset restructuring plan (draft), which includes major asset replacement, share purchase of assets and non-public offering shares to raise matching funds. The company replaces its main assets and part of its liabilities with the equivalent portion of the 67% stake held by Beijing Food Group. After 67% of the shares of Beijing Grain shares were priced, the difference after the replacement of the above assets was purchased by Pearl River Holdings by issuing shares to the Beijing Food Group. At the same time, Pearl River Holdings purchased a total of 33% of its shares in Beijing Grain from the State Management Center, State Development Finance and Xinniu Runying, with an issue price of no less than 8.09 yuan per share. At the same time, the company plans to raise 570 million yuan of matching funds from the non-public offering shares of Beijing Food Group at the issue price of 8.82 yuan per share, which will be used for the target company's R & D center project, channel brand construction project, payment of taxes and fees related to this transaction and personnel placement expenses. New model of state-owned enterprise reform, increased holdings of major shareholders demonstrate confidence on September 5 this year, Beijing Food Group transferred 26.36% of its shares from Beijing Wanfa to Pearl River Holdings, becoming the company's controlling shareholder and officially joining Pearl River Holdings. After the implementation of the restructuring plan, the shareholding of Beijing Grain Group will be increased to 41.77%. In addition, the company announced on November 10 that based on the restructuring target of the company's major asset restructuring and the confidence of the company's future development, the controlling shareholder Beijing Food Group will increase its stake in the company by no more than 220 million yuan through the secondary market. Beijing Cereals Group is a large wholly state-owned enterprise funded by the Beijing Municipal people's Government, and it is the only executive body of grain and oil emergency guarantee in the capital. In 2015, Beijing Grain Group had total assets of 18 billion yuan, grain and oil storage capacity of 5.1 million tons, annual grain and oil processing capacity of 4.2 million tons, annual grain operation volume of more than 8 million tons, commercial real estate area of more than 700,000 square meters, and annual sales income of 24.3 billion yuan. This time, Beijing Grain Group has placed its profitable and growing vegetable oil processing and snack food manufacturing businesses into listed companies, helping listed companies to complete the transformation. At the same time, they can also make use of the strength of the capital market to further expand and strengthen the company's two main businesses. If the restructuring plan is successfully implemented, it will become a new model for the reform of state-owned enterprises in Beijing. With the purchase of high-quality assets, future performance growth can be expected that the main business of Beijing Food Co., Ltd., which will be placed in listed companies, is the processing, sales and trading of vegetable oil and oil, as well as food manufacturing. Its subsidiaries mainly include Beijing Grain Tianjin, Eisen Lubao and ancient ship oil, ancient ship oil ancient coin branch, Zhejiang Little Prince and so on. Excluding the subsidiaries that have transferred out of Beijing Grain shares and offsetting internal transactions, Beijing Grain shares had an operating income of 5.04 billion yuan in 2015, an increase of 13.61 percent over the same period last year, and a net profit of 158 million yuan, an increase of 54.90 percent over the same period last year, deducting 78 million yuan in net profit from non-parent companies, an increase of 24.88 percent. From January to May this year, the operating income was 2.263 billion yuan, the net profit was 66 million yuan, and the non-return net profit was 50 million yuan. The company has achieved steady growth in performance in recent years.

In the restructuring plan, Beijing Grain promised to achieve a non-return net profit of not less than 123.6821 million yuan, 130.1115 million yuan and 150.3937 million yuan respectively in 2016,2017 and 2018. According to the performance commitment, its net profit deducted from non-homing in 2016 will grow by at least 57.92%, achieving rapid growth.

Profit forecast and valuation

After the successful completion of this restructuring, it will further strengthen the company's profitability, improve the company's growth, complete the transformation of the main business of listed companies, and become a new model for the reform of state-owned enterprises in Beijing. At the same time, the controlling shareholder Beijing Food Group is strong and confident about the restructuring and the future development of the listed company. We expect the company to achieve faster development in the field of vegetable oil processing and snack food manufacturing in the future. Do not give the target price for the time being, increase the rating.