Event

On the evening of May 17, the company announced that the company intends to issue 52.64 million shares to the other party at 33.37 yuan per share and pay 3.244 billion yuan in cash for 5 billion yuan to acquire 100% equity interest in Beijing Feiliu Jiutian Technology Co., Ltd. At the same time, the company plans to raise a total of ≤ 3.644 billion yuan per share from 9 non-public offering shares of Wang Jinjun and Yinghe in Xinjiang, which will be used to pay the cash consideration of the restructuring, pay the taxes and fees of the restructuring transaction and supplement Feiliu's nine-day liquidity. Wang Jinjun's subscription shares shall not be transferred within 48 months from the date of completion of the issue, while eight other supporting financing investors, such as Xinjiang NetQin, shall not be transferred within 36 months from the date of completion of the issue.

Brief comment

Prince Xinliao is the leader of plastic packaging for electronic products, which is a drag on performance, such as the slowdown of the industry and the increase of research and development. Prince Xincai is mainly engaged in the production and sales of plastic packaging materials and products, including plastic packaging film, plastic tray and plastic cushioning material. After years of development, the company's customers cover well-known large-scale electronics manufacturing companies at home and abroad, including Foxconn, Haier, Flextronics, Ricoh, Epson, and other multinational companies, as well as Skyworth, TCL, Shenzhen Super Optoelectronics, Shenzhen Great Wall and other listed or leading domestic electronics manufacturing companies.

On the one hand, from the overall situation of the downstream industry, the 2015 Electronic Information Industry Statistical Bulletin of the Ministry of Industry and Information Technology shows that the added value of China's electronic information manufacturing industry increased by 10.5% in 2015. Compared with previous years, the growth rate has slowed to a certain extent, showing a high slowing trend.

The retail sales of household appliances in China's 50 key large retail enterprises fell 3.90% in 2015 compared with the same period last year. On the other hand, the company carried out research and development projects in 2015, the new polylactic acid biodegradable gas bead buffer film project and the application of PLA biodegradable materials blister products, resulting in a substantial increase in management costs (an increase of 32.54% in 2015), resulting in a larger decline in company profits than income. In 2015, the company achieved operating income of 440 million yuan, down 8.10% from the same period last year; net profit belonging to the parent company was 26 million, down 18.83% from the same period last year; the company's performance continued the downward trend, with revenue and net profit of 93 million and 5 million respectively, down 11.53% and 15.52% respectively from the same period last year.

Feiliu nine days mobile games and mobile Internet marketing business dual-driven, high growth performance commitment to show confidence. Feiliu Jiutian is a leading mobile game distribution operator and professional mobile Internet marketing service provider which integrates R & D and distribution operation and has its own mobile marketing platform.

(1) in terms of mobile games, Feiliu Nine days has formed a "one-stop" service system from R & D to operation, which covers game research and development, distribution and operation, and focuses on the agent distribution and operation of mobile games. In recent years, Feiliu Jiutian has successfully issued and operated a number of popular game products, such as "conquering the city and grabbing the land", "snapping the three Kingdoms", "sword dancers", "Tank Fengyun", "mainland of God and Devil" and so on.

According to the Quarterly Monitoring report of China Mobile Limited Game Market released by Analysys think tank, in the fourth quarter of 2015, Feiliu ranked among the top 3 in the iOS platform release list, the Android platform in the top 7, and the whole platform in the top 6, with a high market position in the mobile game industry.

(2) in terms of mobile Internet marketing, Feiliu Nine days provides customers with efficient multi-channel promotion services. Through integral broadcasting, plug-in advertising, Banner advertising, offline promotion, own platform promotion and other forms, Feiliu Nine days provides professional APP promotion, mobile advertising and other services for customers in e-commerce, finance, games, live streaming, media information and other fields. Through years of industry accumulation, Feiliu Jiutian has obtained many online and offline media resources, serving customers including JD.com, Meituan, Qunar, Dianping, UC browser, Ping An Insurance and so on.

Driven by mobile games and mobile Internet marketing carriages, in 2014 and 2015, Flying Liujiutian realized operating income of 687 million yuan and 904 million yuan respectively, and realized net profit of 139 million yuan and 287 million yuan respectively.

(3) High growth performance commitment demonstrates confidence: the other party Shi Wenyong, Xinjiang Yinghe, Jinxin Henghui promised that in 2016,2017 and 2018, after deducting non-recurrent profits and losses, the audited net profit of Feiliu Nine days belonging to the shareholders of the parent company is not less than 400 million yuan, 500 million yuan and 600 million yuan, respectively.

Investment advice: the company acquired Feiliu nine days, entered the mobile game industry, Feiliu nine days in mobile games and mobile Internet marketing business has rich experience, good quality, combined with performance commitment guidance, we initially assume that the company's performance commitment can be fulfilled. In terms of the main business of the company, the net profit for the whole year in 2015 was 26.37 million yuan. Combined with the situation of 2016Q1, we initially assumed that the net profit of the old main business of the company in 2016-17 was 2400 and 25 million respectively. The total net profit of the company in 2016-17 is 424 million and 525 million respectively, corresponding to the diluted total equity of 242 million, EPS 1.75,2.17 yuan, PE 24, 19 times, the total market capitalization 10 billion, the valuation has a safety margin, but ultimately depends on the landing of project mergers and acquisitions under the current policy background, but in any case, on the basis of 3.3 billion market value before suspension, the direction of transformation has been determined. Cover for the first time, giving a "buy" rating.

Risk factors: the acquisition process is lower than expected due to the disturbance of policy factors; the nine-day performance commitment of Feiliu falls short of expectations.