Main points of investment:
Event: Nantian Information issued an announcement on withdrawing the application documents for the company's non-public offering of shares.
The uncertainty and worry that has been troubling the market has finally landed. In our previous Nantian information report, "short-term need to wait for a definite signal, medium-and long-term incentive reversal needs to be clearly pointed out" and the company's additional issuance plan needs to be clear, and investors are advised to wait for a definite signal in the short term. "continue to be optimistic about the improvement of corporate incentives and the frequent occurrence of industry benefits in the medium and long term," and pointed out directly in the risk warning that "risk warning: the uncertainty of additional issuance and plans need to be further clarified". In addition to this report, the subject is not recommended in two other latest industry reports for the time being. We suggest that the basis for waiting for the confirmation signal is that "regulators have been tightening the review of refinancing of listed companies since 2016", as evidenced by the statement issued by Panorama on July 27, "41 listed companies are subject to stringent regulatory audits".
The improvement of incentives and the increase of profits have not changed at all. The announcement said, "the company needs to further improve the investment project to raise funds for this non-public offering, in view of the fact that the relevant work requires a certain period of time." . It is also pointed out that "the follow-up matters will be arranged after the completion of the improvement of the non-public offering fund-raising investment project". The announcement will continue to apply for additional issuance after implying that it will amend the offering direction. It is speculated that after this application is withdrawn, through modification and re-declaration, the probability of subsequent refinancing will be increased, which reflects the company's determination to improve governance. So the fundamentals have not changed.
If the withdrawal is not successful, the fundamentals and the progress of additional issuance will continue. If the withdrawal is successful, the company will have higher incentive costs and implied investment opportunities!
The withdrawal of the application still requires approval. 1) if the regulatory authorities do not agree to withdraw, the fundamentals will continue. 2) if the withdrawal is successful, it is speculated that the IPO price may be re-locked, and the management shareholding price is the same. According to the March 15 announcement, the issue price is determined by the subsequent market price (90% of the average trading price of the company's shares for 20 trading days before the pricing benchmark). The current price is 20.83 yuan higher than the reserve price of 16.30 yuan for the last IPO. Rational investors have investment opportunities to share dividends that are close to the cost of increasing holdings by management.
Many optimistic growth signals imply a reversal in profits. 1) the impairment loss in 2015 was 43.69 million yuan, including 23 million yuan in bad debts and 16.57 million yuan in intangible assets. 2) the gross profit margin has risen for two years in a row, which shows that the proportion of software business has increased. 3) Karakal hinted at the beginning of a continued acquisition.
Maintain the "overweight" rating and maintain profit forecasts. Taking into account the expected IPO and incentive continuation, extension has become an ongoing strategy, buying Nantian information is equal to buying a profit reversal (historical bad debt impairment is accidental, gross profit margin goes up), and it is possible that the purchase cost is lower than the executive incentive cost! It is estimated that the operating income of the company from 2016 to 2018 is 22.60,25.39 and 2.731 billion yuan respectively. The net profit from 2016 to 2018 was 21 million, 52 million and 57 million respectively, and the profit for the preparation for the examination was 0.72,1.20 and 132 million yuan respectively.
