1. The actual controller of ST will be changed into CIC, which is expected to be completed from March to April 2016.
China Investment Central signed an agreement with ST Yibin International Asset, the largest shareholder, and Yibin Wuliangye Group, the second largest shareholder, to buy all 56.7 million shares of ST Yi Paper (accounting for 53.83% of the total share capital of 105 million shares before the fixed increase) at a total price of 897 million yuan. ST is a state-owned asset and is subject to the examination and approval of SASAC. The change of international controller is expected to be completed from March to April 2016.
2. ST should buy Wanhui Technology for 900 million yuan, adding waste heat heating to provide growing profits.
The fixed price is 16.27 yuan per share, with a total issue of 110 million shares, with a total size of 1.8 billion yuan. 1.8 billion yuan = 900 million yuan to acquire 100% equity of Huanhui + 900 million yuan to raise funds. Issue 55 million shares and acquire 100% stake in Huanhui Technology through equity, with a target price of 900 million yuan. The non-attributable net profit of commitment deduction from 2016 to 2018 is 60 million yuan, 120 million yuan and 200 million yuan respectively.
3. ST paper should be introduced into garbage plasma gasification operation + equipment manufacturing plate with high elasticity.
Raised 900 million yuan, including 450 million supplementary working capital, 350 million yuan invested in plasma gasification equipment manufacturing base (initial total investment 500 million yuan), 100 million yuan invested in Sichuan Jiang'an plasma gasification waste operation project (Jiang'an project total investment 150 million yuan)
Plasma gasification power generation technology, the environmental protection index is better than the EU standard, does not produce dioxins, fly ash, waste residue and other secondary pollution, and is easy to popularize. The total size of the market has been estimated to exceed 200 billion yuan.
Jiang'an garbage plasma gasification power generation project with an investment of 150 million yuan and a payback period of 3-5 years. Using Germany Biwei garbage plasma gasification power generation technology, the thermal efficiency is higher, the power consumption rate is estimated to reach about 15%, and the power consumption per ton of garbage is about 500 kilowatt-hours. Garbage equipment manufacturing plate: a single set of equipment contributes considerable profits, the initial design capacity of 20 sets, huge performance flexibility.
Doubts about garbage plasma gasification power generation: the power consumption rate of other companies (Westinghouse, Chinese Academy of Sciences) is 25%, 30%, 15%, and 700 kilowatt-hours per ton remains to be verified.
4. Content + summary of views: the new environmental protection sector has a broad market and good performance flexibility, but the technology is uncertain and needs to be verified. According to a conservative estimate, if ST completes the actual controller change + reorganization + fund-raising in 2016, and Wanhui Technology consolidates for the whole year in 2016, the performance from 2016 to 2018 is conservatively estimated to be 80 million yuan, 320 million yuan and 750 million yuan, respectively. Based on the total share capital of 215 million shares after fixed increase, the diluted EPS is 0.37,1.49 and 3.49 respectively. If 30 times the valuation is given according to the 2017 EPS, the target price is 44.7 yuan. Then 215 million of the total equity corresponds to a market capitalization of 9.6 billion yuan.
5. Risk hint: reorganization schedule risk, the project construction and production schedule is not as expected, and the project effect is not as expected.
