Incident: On June 26, the company announced that the controlling shareholder Guangxin Group increased its shares by 520,000 shares. The average price of the increase was 7.84 yuan/share. It is not ruled out that it will continue to increase its holdings in the secondary market in the future.
Comment:
The increase in majority shareholders' holdings shows confidence, and the previous overfall is expected to usher in a rebound: Guangxin Group, the controlling shareholder of the company, increased its holdings of the company by 520,000 shares through bidding transactions, accounting for 0.0298% of the company's total share capital. After the increase in holdings, the total number of shares held by the company reached 266775961 shares, accounting for 15.3% of the company's total share capital. We believe that the current increase in the majority shareholders' holdings shows confidence in the company's development, reflecting an underestimation of the current stock price. The company suspended trading on November 26, 2016, resumed trading on May 25 this year, and was adjusted 25.35% until now. Since the suspension period, the media sector has recovered 21.15%, and the integrated marketing sector has pulled back about 17.75%. The company's integration of mobile marketing resources continues to advance. Shanghai Changsi, which plans to buy high-quality game marketing targets in cash, is expected to further expand and extend the company's digital marketing business matrix. The overfall in the early stages is expected to lead to a rebound.
Cash acquisitions broadened and strengthened the mobile marketing platform, with steady performance growth, Hengqiang: Previously, the company suspended its listing and proposed stock acquisitions to expand. Considering market changes and the company's own integration plans, the company terminated additional issuance and switched to self-funded cash of 528 million yuan to acquire Chang Si, indicating that the company persists in advancing the integrated marketing group strategy and continues to strengthen the company's strengthened layout in emerging business fields and digital marketing sectors. The target party promised to achieve net profit of no less than 60, 75,88 million yuan in 2017-2019, corresponding to net profit of 43.5 million yuan in 2016. The performance growth rate was based on this Achieved: 39%, 25%, 18%. The acquisition consideration corresponding to the 2017 performance promise is 11×PE. The valuation is reasonable. The performance promise for this acquisition will purchase a total of 80 million yuan of the company's shares within 30 and 42 months after receiving the second instalment payment, accounting for about 15% of the consideration amount paid this time, which is conducive to binding management and ensuring the steady operation of the target. Currently, the company has sufficient monetary capital of 1,192 million yuan. Cash purchases are beneficial to enhancing the company's performance. Considering the company's current cash acquisition of Changsi Advertising, integrated marketing continues to advance steadily. Client-side high-quality brand customers accumulate advantages, the data side integrates market big data resources, and the channel side accumulates advantages in high-quality media resources. Without changing the logic that is optimistic in the medium to long term, the pattern of strong players in the industry continues to be strong.
Shanghai Tuochang: Deepening the integration and collaboration of customers, resources and media resources: Shanghai Tuochang is rooted in the touch technology platform system - a leader in the development of the Chinese game industry. It has rich resources in the gaming field. Based on rich industry resource reserve companies, it mainly provides mobile performance promotion services to game and e-commerce application developers. It includes a rich Internet advertising and marketing matrix such as advertising management platforms, DSP, SSP, and DMP, which has successively promoted and achieved good live streaming results for “Clash of Clans”, Qin Shimingyue, Vipshop, Huajiao, etc. . In the context of the rapid development of the mobile marketing industry (the market size exceeded 130 billion dollars in 2016, the growth rate reached 126%), the company's acquisition was smooth, and clients are expected to expand the company's customer development in the game field through the rich customer resources of the Changthink gaming sector. At the same time, the company will be able to obtain objective, large amounts of user data and enhance mobile marketing plan design capabilities, fully benefiting from the fact that the marketing industry continues to maintain a rapid growth trend. The channel side has further strengthened the advertising management platform and media platform, thus fully complementing the media side of the province, which strengthens the overall customer service capacity and enhances the service effectiveness of the service. .
Profit forecast and valuation: We expect the company's net profit for 2017-2019 to be 755, 871, and 1,027 million yuan respectively. The corresponding EPS is 0.43/0.50/0.59 yuan respectively, corresponding to the current stock price 18.2, 15.8 and 13.4 times PE. Continuing to be optimistic about the company as an integrated marketing leader, it enjoyed the dividends of the industry's continuous growth through endogenous+outreach development. After the resumption of trading, it overfell with the market pullback. The increase in majority shareholders' holdings showed confidence and did not rule out a continued increase in holdings in the future, maintaining a highly recommended rating.
Risk warning: Outreach is not progressing smoothly, integration risks, and industry growth is slowing down.