Weigao Orthopaedics intends to borrow Shell Hengji Daxin: on June 14, 2016, Hengji Daxin issued a major asset restructuring plan, which is intended to replace all assets and liabilities with the equivalent part of Shandong Weigao Orthopaedic Materials Co., Ltd., the purchase price of the assets is 1.219 billion yuan, and the 100% equity price of Weigao Orthopaedics is 6.06 billion yuan. The company will purchase the difference from Shandong Weigao Group Medical Polymer with 480 million shares issued at 10.09 yuan per share.
Ownership structure after backdoor completion: after the completion of the transaction, considering the matching fund-raising, the total share capital of the listed company is 869 million shares. Shandong Weigao Group Medical Polymer and his concerted actors will hold 526 million shares of Hengji Daxin, with a shareholding ratio of 60.52%. Shandong Weigao Group Medical Polymer will become the controlling shareholder of the listed company.
Business analysis of the target company: Vega Orthopaedics has long focused on the research, development, production and sales of orthopaedic implants and tools, including spinal, traumatic and joint orthopaedic implants, and ranks first among domestic brands in market share. In recent years, the sales volume of all kinds of orthopaedic implants in Vegao Orthopaedics has increased year by year; the average sales price has maintained a steady upward trend; profitability is at a high level. From 2013 to 2015, the comprehensive gross profit margin of the main business of Vegao Orthopaedics has exceeded 70%. The annual net profit is more than 200 million yuan, which is at a high level in the same industry in China.
Prospect: the scale of the domestic orthopedic medical device industry has expanded rapidly. From 2010 to 2014, the market scale of orthopedic implants in China increased rapidly, with sales revenue increasing from 7.2 billion yuan to 13.9 billion yuan, with a compound annual growth rate of about 17.87%. The market size of the industry will reach 31.1 billion yuan.
Investment advice: the performance promisor promises that the net profit of Vega Orthopaedics in 2016, 2017 and 2018 will not be less than 308 million yuan, 374 million yuan and 469 million yuan respectively, with year-on-year growth rates of 40%, 22% and 25%. We think that the development prospect of the company is good, and the probability of realizing the promised performance is high. According to the committed performance, it is estimated that the EPS of the company in 16-18 years is 0.35,0.43,0.54 yuan. On February 24, 2016, the company's share price was 12.66 yuan before trading was suspended, the market capitalization after the corresponding restructuring was 11 billion yuan, and the PE was 36, 29, 24 times 16-18 years after the corresponding restructuring, covering the "buy-A" rating for the first time, with a target price of 17.15 yuan.
Risk hints: the progress of reorganization is lower than expected, and the demand for orthopedic medical devices is lower than expected.