Incident: The company plans to replace all of its shares held by ① Zhenjiang Port and New Materials ② Jiangsu Zhongji New Materials ③ Gangrun Property with the SME Innovation Park assets held by Jiangsu Hanrui Investment Holdings Co., Ltd., the controlling shareholder of the company, and the Intelligent Equipment Park Phase 1 assets held by the company's controlling shareholder, Zhenjiang New Area Urban Construction Investment Co., Ltd. ④
Divestment of lossless assets to enhance performance, and invest in park assets to speed up transformation. The cumulative net profit loss of Hong Kong and New Materials, China Technology New Materials, Gangfa Engineering, and Gangrun Property in 2016 reached 90.41 million yuan, with net profit of -67.1 million yuan, which greatly weakened the company's performance. Divestment of lossless assets was beneficial to enhancing the company's performance, optimizing the industrial structure, and promoting industrial transformation. At the same time, investing in the park's assets will expand the service scale of the company's park. “Aiko” is located in Phase 1 of the Intelligent Equipment Park, which can drive the attraction of the park and have a synergistic effect.
The reform of state-owned enterprises has set off huge waves, and capital operations are expected to continue. The company is actively promoting capital operation under the wave of state-owned enterprise reform. The transformation ideas are clear and the will is strong. Through divestment of assets, mergers and acquisitions, and the establishment of investment funds, etc., they intend to explore mergers and acquisitions in various fields and use the capital market to grow bigger and stronger. The company initially formed an “integrated circuit” + “military industry”
With the layout of the two major strategic emerging industries, we believe that the pace of the company's state-owned enterprise reform is firm. As policy dividends continue to be released, there is huge room for imagination in the company's national reform.
The merger and acquisition of Alco has entered the integrated circuit industry. It is expected that the mainland IC industry will continue to be deployed in the future. The scale of the mainland IC industry reached 361 billion yuan in 2015, with a self-sufficiency rate of less than 40%, and there is huge room for import substitution. As chip size increases the demand for high-end inspection, third-party testing has become a trend of vertical segmentation. The concentration of the independent testing industry is low and facing integration requirements. Currently, the company accounts for only 1%, and there is plenty of room for development. Relying on Alco as a platform for the electronics industry, the company is expected to continue to expand into the integrated circuit industry chain in the future.
Investment Ratings and Valuations:
Net profit for 17-19 is expected to be 209 million, 307 million, 399 million, EPS is 0.36, 0.53, 0.67 yuan, and corresponding PE is 34X, 23X, and 18X. Maintain a “Highly Recommended” rating.
Risk warning: Asset replacement progress is blocked; performance promises cannot be fulfilled.