Event: Mindong Electric Power issued an announcement, the subsidiary Ningde Huansan Mining Co., Ltd. signed a foreign investment agreement, the company's foreign investment amount of 1.86 million yuan, accounting for 31% of the shares of the new company.
Comments:
Set up a rare earth development company to expand profit growth. Ningde Huansan Mining Co., Ltd. is the company's mining platform, since its establishment, there has been no progress in business. Through the joint establishment of Pingnan County rare Earth Development Co., Ltd with Xiamen Tungsten Industry Co., Ltd and Pingnan Zhijin Development Co., Ltd., it is helpful to expand the business scope of Huansan Mining. As Xiamen tungsten industry is the rare earth integration platform of Fujian Province, and the rare earth resources in the province are mainly developed by Xiamen tungsten industry, the new company will make use of Xiamen tungsten's advantages in the development and comprehensive utilization of rare earth resources to carry out business in the future. to add new profit growth points for Huansan Mining.
The adjustment of the non-public offering plan will consolidate the development of the main industry. The total amount of funds raised and the number of shares issued in the revised non-public offering plan have not been adjusted, and the funds originally used to supplement current funds have been used for the construction of Ningde Hubei wind farm. Due to the change of the market financing environment and the low asset-liability ratio of the company, the company adjusts the refinancing plan, and we think that the adjusted plan is beneficial to the refinancing project. Since its listing, the company has been mainly engaged in clean energy business based on hydropower and wind power. due to the relatively fixed installed capacity of hydropower, the revenue and profits of the power sector are relatively stable from 2013 to 2015. According to the feasibility report of this private placement project, the construction period of Xiapu floating Eagle Island wind farm project is 18 months, with an average after-tax profit of 31.4423 million yuan, while that of Ningde Hubei wind farm project is 12 months, with an average after-tax profit of 25.7246 million yuan. We believe that this private placement will help consolidate the company's main business development and improve its profitability in the future.
Profit forecast and rating: the company's EPS from 2016 to 2018 is expected to be 0.08,0.09,0.12 yuan respectively, maintaining the "overweight" rating.
Risk factors: a sharp drop in precipitation and a reduction in hydropower generation; a reduction in electricity prices; lower-than-expected real estate sales; lower-than-expected speed of mining consolidation; and unapproved private rights issues.