I. Overview of events

Recently, Lianjian Optoelectronics issued an announcement: 1) launch the second phase of the employee stock ownership plan in 2017 2) the joint investment of a wholly-owned subsidiary plans to increase its capital and acquire 100% equity in Beijing Epu New Media Technology Co., Ltd. (hereinafter referred to as "Epu New Media" or "target company") with 627 million yuan, among which, first increase its equity by 31.35 million yuan to Epu New Media, and then transfer 95% equity to Epp New Media with 595.65 million yuan.

II. Analysis and judgment

The employee stock ownership plan has a large amount of funds, long lock-up period and wide coverage, which is beneficial to the stock price of the company. 1. The company buys back the shares of the company with its own funds, the total repurchase amount is no more than 240 million yuan, and the repurchase price does not exceed 24.80 yuan per share. It is proposed that the stock of the company whose repurchase cost does not exceed 195 million yuan will be used as the stock source of this employee stock ownership plan.

2. The upper limit of the total funds of the employee stock ownership plan is 195 million yuan, and the duration is 36 months. According to the upper limit of the total capital of 195 million yuan and the price ceiling of 24.80 yuan per share, the number of shares that the employee plans to buy and hold is about 7.8629 million shares, accounting for 1.28% of the total share capital of the company. The lock-up period of the underlying stock is 12 months and 24 months respectively, and the unlocking ratio is 50% and 50% respectively.

3. We believe that this employee stock ownership plan covers core employees and has a long lock-up period, which is larger than the total funds of the first phase of the employee stock ownership plan in 2017, and will further establish a long-term incentive mechanism and sharing mechanism to attract and retain talents. fully mobilize the enthusiasm of core employees. As the investment target of the employee stock ownership plan, the share buyback will be good for the company's stock price, indicating that the company has long-term development potential, and the company's investment value is prominent.

The target company's acquisition of PE is reasonable, has good growth, and has a synergistic effect with the company's main business.

1. Epp New Media focuses on mobile advertising business, mainly engaged in promotion based on integrated self-media matrix and advertising promotion based on Mobile Marketing big data platform "Cloud Rubik's Cube". It has successfully developed and released more than 100 App products to Apple Inc's App Store platform, covering weather, games, shopping, life, news, tools, social networking, navigation and other aspects.

2. In 2016, the revenue of the target company was 89.27 million yuan, and the net profit was 24.92 million yuan. From January to April 2017, the revenue of the target company was 42.65 million yuan, and the net profit was 96.87 million yuan. According to the performance commitment, Epp New Media will deduct the non-return net profit of not less than 45 million yuan, 58.5 million yuan, 70.2 million yuan and 77.22 million yuan respectively from 2017 to 2020, and the corresponding acquisition PE will be 13.9,10.7,8.9 and 8.1 times respectively.

It is estimated that the compound growth rate of the net profit of the target company deducting non-return in the next four years will be 32.7%.

3. This acquisition is good for the stock price of the company. According to the Investment Agreement, in order to ensure the performance commitment and the realizability of the obligations under this agreement, the original shareholders of Epu New Media shall use 65% of the transfer price (a total amount of 387.1725 million yuan) to buy the company's shares in the open market according to the proportion of the shares held by the original shareholders and pledge them to joint investment. The original shareholders of Epu New Media will release the pledge of the corresponding proportion of the shares in batches according to the progress of realizing the profit promise.

4. We believe that the acquisition of Epp new media will expand the company's mobile advertising business, form a joint force with the company's brand advertising companies, and have synergy. After the completion of this acquisition, it will have a positive impact on the company's stock price and its performance in 2017 and beyond.

The mobile advertising industry has high growth and large scale, and the company's competitive advantage is prominent.

1. According to the data released by iResearch Consulting, China's online marketing revenue reached 290.27 billion yuan in 2016, an increase of 32.9 percent over the same period last year, of which the mobile advertising market reached 175 billion yuan (accounting for more than 60 percent), an increase of 75.4 percent over the same period last year.

2. We believe that the mobile advertising industry is facing a rare opportunity for development. With the help of the superior resources of the target company and its digital marketing business, the strategic planning of the data-driven intelligent integrated marketing service group is accelerated. The company's competitive advantage in mobile marketing is further revealed.

Third, profit forecast and investment suggestions

Considering that the company carries out equity incentives to the management in 2016, the exercise price of equity incentives on May 17, 16 is 24.40 yuan per share, and the current stock price has high security. It is estimated that the EPS of the company from 2017 to 2019 is 0.97,1.12 and 1.26 yuan. Based on the flexibility of the company's performance growth, the company can be valued at 30 to 35 times in 2017 and a reasonable valuation of 29.10 yuan to 33.95 yuan in the next 12 months, maintaining the "highly recommended" rating.

Fourth, risk tips:

1, the performance of the acquiring company is not as expected; 2, the business integration of subsidiaries is not as expected; 3, the competition in the industry is intensified.