Event

The company announced that it intends to issue a total of 176 million shares to Sanzhou Special Management, China Nuclear Power Institute and Huaxia Life Insurance Company at 9.09 yuan per share to purchase its 100% stake in Sichuan Sangzhou Chuan Machinery and Nuclear equipment Manufacturing Co., Ltd., at a price of 1.6 billion yuan. At the same time, it is proposed that 11.97 yuan per share will be issued non-publicly to Sanzhou Special Management, Zhongguang Nuclear Capital, National Nuclear Fuying, Tibet Guanghe, Zhonghe National Energy, Yongtuwatong, Beijia Kailong and Xinhe Jingcheng to raise 814 million yuan of matching funds. for the Sanzhou nuclear energy third-generation nuclear energy key components advanced manufacturing production technology transformation construction project, to pay the intermediary fees related to this transaction The rest is used to replenish the working capital of listed companies.

Brief comment

Macroeconomic drag on performance, Qunxing main business profitability decline. Qunxing Toys mainly specializes in the R & D, design, production and sales of electronic electric toys, including strollers, computer learning machines, electric cars, baby toys and toy mobile phones. Affected by the downward economic cycle, RMB appreciation, rising raw materials and labor costs and other factors, the company's operating income in the three quarters of 2013-2015 was 5.01,4.04 and 279 million yuan respectively, deducting non-return net profit of 23.5876 million, 14.6709 million and 20.6427 million, respectively. The company's profitability has declined.

The acquisition of Sanzhou Nuclear Energy is expected to form a dual-main industry drive. Sangzhou Nuclear Power is the main supplier of nuclear power main pipeline in China, and it is also the only qualified supplier of military main pipeline in China. We believe that relying on the rapid development of the nuclear industry and the good qualifications of the three cores, the acquisition of Sanzhou to create the company's second main business is expected to become a new driving force for the company's performance:

(1) the nuclear power market is developing rapidly: from January to September 2015, nuclear power accounts for about 3.0% of the country's total power generation. According to the 13th five-year Plan of nuclear power, the proportion of nuclear power generation will increase to 8% in 2020, and the installed capacity of nuclear power will reach 1.2-150 million kilowatts. Based on this, it is estimated that by 2020, the installed capacity of China's new nuclear power units will be 13000 yuan / KW per unit investment. The total investment in nuclear power construction will exceed 104 billion yuan every year, and according to 50% of the investment in nuclear power equipment, the average annual demand for nuclear power equipment will exceed 52 billion yuan.

(2) the layout of the whole industry chain system, supported by the three nuclear power giants: the quality of Sanzhou nuclear power is excellent, and its main products include nuclear power main pipeline, military main pipeline, civil pipeline equipment and pipe fittings. with the whole industry chain system of research and development, design, production and sales, the third-generation nuclear power technology has made great progress, which is conducive to the follow-up long-term development. At the same time, at present, there are only three nuclear power operation qualifications in China, namely, China Guangzhou Nuclear Power Group, the State Nuclear Power Technology Corporation and the China Nuclear Power Corporation. Among the strategic partners participating in the fixed increase of nuclear power in the three continents, Guangzhou Nuclear Capital, National Nuclear Power and China Nuclear Power Research are the subsidiaries of the above three nuclear power giants respectively, bringing natural advantages for the subsequent qualification acquisition of the three continents nuclear power.

(3) strong guarantee of performance commitment: Sanzhou Special Management and Huaxia Life promise three continents nuclear energy.

The net profit from 2016 to 2018 is not less than 121 million yuan, 193 million yuan and 282 million yuan respectively, and the future performance of Sanzhou nuclear power is guaranteed.

Investment suggestion: the profitability of the company's main business is dragged down by the macro economy, and it is expected to enter the nuclear power and military industry to build a second main industry. We expect the company's net profit in 2015 and 2016 to be 15.57 million and 105 million respectively, corresponding to EPS 0.03,0.18 (corresponding to diluted EPS 0.12), and PE 626,93 (corresponding to diluted PE 132) times, covering for the first time and giving "overweight" rating.