Matter: the company announces that it intends to buy 100% equity of Boris with the combination of issuing shares and paying cash. The transaction price is 958 million yuan. At the same time, the total amount of supporting funds to be raised will not exceed 260 million yuan, and the base price will be 6.81 yuan per share, which will be used to pay part of the cash consideration, related intermediary fees and the construction project of Boris Seth mobile marketing platform. The target promises to deduct non-net profits of 67 million yuan, 87.1 million yuan and 113.3 million yuan from 2016 to 2018, respectively.
The target is an excellent mobile marketer in the industry, with rapid growth in performance: the target company and its subsidiaries have strong ability to integrate and promote mobile media resources, and have established good cooperative relations with Jinri Toutiao, NetEase, Inc youdao, Tencent, popular Video, Dianping, Xinhua Xianwen and other channels. Provide promotion services for JD.com, Tencent, Qunar, KuGou, etc., and actively explore overseas markets to provide overseas promotion business for advertisers. According to the company's financial report, it is in a period of accelerated performance, with income and net profit of 127.12 million yuan and 31.97 million yuan respectively in the first half of 2016, an increase of 24.09% and 13.90% respectively over the whole of 2015.
With the rapid development of mobile marketing, there is a vast market space of 100 billion yuan: according to the number of Chinese industrial information networks, China's Internet advertising revenue exceeded 200 billion yuan in 2015, double the TV advertising revenue in the same period, and the CAGR was 39.39% in the past three years. Among them, mobile advertising has developed particularly strongly in recent years, with a market size of 90.13 billion yuan in 2015, an increase of 178.30%. With the popularity of intelligent terminal devices, the improvement of the mobile Internet environment, and the continuous innovation of mobile advertising products, the market scale will continue to expand rapidly in the future. It is expected that the market size will exceed 300 billion yuan by 2018, and the penetration rate in the online advertising market will reach 80%. In addition, the overseas mobile marketing market is also huge, and Bursese India and other developing countries are in the early stages of mobile Internet growth.
Ecological and environmental protection is expected to accelerate in the second half of the year. The company's ecological and environmental protection business has a large decline in net profit due to the decline in gross profit in the first half of the year, which is expected to accelerate in the second half of the year. In 2015, the company acquired Deep Blue Environmental Protection and entered the solid waste treatment industry, with a net profit of 32.54 million yuan that year, and it is expected that this year's performance commitment will also be successfully fulfilled. In the future, the company is expected to achieve rapid growth of environmental protection business through PPP model, and make use of the Internet perspective brought about by this transaction to create a first-class comprehensive platform of "ecological landscape + green environmental protection + intelligent people's livelihood" in China.
To resume trading, we need to consider the effect of plate replenishment. During the suspension period, the Shenwan landscape engineering index increased by 21%, and the plate make-up effect should be taken into account in resuming trading. In addition, the company's additional offering price is 6.81 yuan, and the price before suspension is only 8% higher.
Investment advice: we expect the company's 2018 net profit to be RMB 2.277 / 456 million (2017 / 2018 is pro forma profit) and EPS to be 0.13 / 0.21 / 0.25 (diluted), with a target price of 9.45 yuan and a buy-A rating.
Risk hint: business transformation risk, macroeconomic downside risk.