The event invited Mr. Mao Xiaolin, chairman of Shenyue Optoelectronics, to communicate with institutional investors via conference call. Star Technology acquires 100% of Shenyue Optoelectronics's shares: it plans to issue shares to Mao Xiaolin, Hong Chenyao, Nanhai Innovation, Haitong Kaiyuan, and Shenzhen and Shenzhen to make concerted efforts to purchase 100% of their total shares in Shenyue Optoelectronics; at the same time, the company plans to issue shares from no more than 10 other specific investors to raise supporting capital to raise no more than 25% of the total amount of supporting capital raised; part of the supporting capital will be used to pay cash consideration for the purchased assets. The remaining portion of the operating capital of the target company will improve the integrated performance of this transaction. The asset transaction price is about 839 million yuan. About 85% of the shares were acquired using the targeted issuance of 53.2 million shares (13.43 yuan/share), and the remaining portion was paid in cash for about 125 million yuan. At the same time, 23 million shares were issued privately at a reserve price of 12.09 yuan, and the supporting capital raised did not exceed 278 million yuan. If issued according to the upper limit, the total share capital will increase from 150 million shares to 226 million shares after full dilution. On November 27, 2013, the above related matters were officially approved by the China Securities Regulatory Commission. Industry view The touch screen industry is still a hot industry in the electronics industry. The industry is gradually maturing, various technology routes are gradually becoming clear, and investment timing is relatively good: 1) At this stage, the main touch products target consumer electronics, and will penetrate into automobiles, smart homes, and high-end electronic devices in the future. 2) The mainland is a region with a relatively concentrated industrial chain and international competitiveness. The technology, scale and management level have reached a certain level. Compared with the Taiwan region, it has achieved rapid development. 3) The trend of capacity transfer is obvious. More and more international customers are looking for mainland enterprises as suppliers, and the demand for supply chain support is obvious. The only evaluation criteria for the technology route of the touch control industry is whether the market can accept it; the technology recognized and accepted by the market is good technology. Shenyue Optoelectronics mainly uses GFF and flexible capacitive screen technology, and the on/in-cell is suitable for high-end mass shipping models and has a high degree of customization; the number of OGS applications is not too large, it is more suitable, applications with high requirements for lightness and thinness, and narrow frames; GFF has achieved a clear breakthrough in lightness and thinness. On the one hand, it can be combined with full lamination to meet the needs of high-end products; on the other hand, it can also meet the needs of low-end products through PG and single-layer multi-point products. At this stage, most models are in a marine tactic, and a variety of small batches are in line with market development. This is one of the core advantages of GFF products. The basic situation of Shenyue Optoelectronics: The company entered the industry early and has been in this industry for a long time. It has seized the opportunity during the period of rapid development of capacitive touch screens, and is now a large-scale touch factory. The company has a complete range of products, divided into three parts: 1) Mobile phone capacitive touch screens: The main customers are Samsung, Lenovo, and Backgammon, followed by Huawei, Yulong Coolpad, and LG. At this stage, the monthly production capacity is 4kk~5kk, and the future expansion will reach a monthly production capacity of 8kk~10kk. 2) Tablet and laptop touch screens: Relying on the experience and customer accumulation of large resistive touch screen products in the past, thin-film products have a high capacity utilization rate and technical advantages. Customers include first-tier customers such as HP, Samsung, Dell, Lenovo, and Asus, with a monthly production capacity of 2kk. 3) Resistive touch screen: meets the needs of industrial control, automotive electronics and smart home applications. There is a lot of room for expansion in the company's production capacity scale and customer structure. At this stage, the mainland market is second only to Ophiguang, and we hope to continue to do a good job in the service and support of the industrial chain. New technology layout such as medium to large size nano-silver: In terms of metal mesh, Shenyue Optoelectronics is promoting nano-silver. From the perspective of the process, metal mesh is relatively simplified. The wiring must have an organized design, use copper or silver wire, and there are limitations on the choice of LCD panels. If LCD is selected, the metal mesh scheme is determined. If LCD is replaced with metal mesh, it also needs to be replaced. Nano silver can achieve the thinnest 5 um. There is no problem with selecting LCD. Nano silver is more suitable for roll-shaped materials. R2R does not require the purchase of new equipment. There is material investment in the Metal Mesh design, and the threshold is also relatively high. The company has excellent partners from raw materials to nanosilver manufacturing. The company's integration with Star Technology, and future expansion space: 1) Before the company was integrated with Star Technology, Star Technology was the company's supplier. In the past, Star Technology accounted for about 20% of purchases, but now it is continuously increasing the volume of procurement, and is also promoting Star Technology to improve product quality. It is hoped that in the future, 50% of the company's cover will be purchased from Star Technology. Future plans include a monthly purchase volume of 4 kk for mobile phones (accounting for about 50%) and a monthly purchase volume of 1 kk for medium size phones (accounting for about 50%). At the technical level, the cover mainly affects the yield of screen printing, while the touch screen screen printing requirements are higher. The requirements in terms of product precision, dust-free workshops, and cover glass are higher than cover glass, which is more complicated than cover plates. After the integration, Star currently mainly has insufficient capacity utilization. Shenyue Optoelectronics will supplement orders, which will increase the capacity utilization rate of Star Technology's cover board. 2) With the expansion of production capacity and customer penetration, the company has achieved no problems with performance assessment standards and strives to achieve development that exceeds expectations. At this stage, part of the production capacity of mobile phones has not yet been shipped, and the current production capacity in Q2 of 2014 can be saturated. 1kk of medium and large sizes are shipped, and some production capacity is reserved for brand customers, so there is still room for performance improvement in the near future. Risks suggest that smart terminals will not meet expectations, major international customer penetration is slow, and asset restructuring and merger and acquisition plans will fall short of expectations. Performance forecasts and valuation indicators Before mergers and acquisitions, only the performance of Star Technology's parent company is considered before the merger and acquisition is completed. Conservatively, the company's net profit for 13/14/15 is -0.61/0.19/0.26 billion yuan, corresponding EPS is -0.41/0.13/0.18 yuan, and PE for 14/15 is 103.8/74.0. Active exam preparation guidelines and confident management after the completion of the merger and acquisition: The company and Shenyue Optoelectronics signed a profit compensation related agreement. Shenyue Optoelectronics promised that the net profit attributable to shareholders of the parent company after deducting non-recurring profit and loss achieved in 2013, 2014, and 2015 would not be less than 72.5 million yuan, 92.5 million yuan, and 110 million yuan respectively. If the expected targets were not met, compensation would be made using stock and cash methods. More importantly, Mao Xiaolin, Hong Chenyao, and Shenzhen joined forces. The three parties shared 74.4% of Shenyue Optoelectronics's shares and promised to obtain shares from this exchange The stock will not be transferred for 36 months from the date of listing, which comprehensively reflects management's confidence and determination in the future of the company's business. After the merger and acquisition is completed, assuming that factors that may contribute to performance in the future, such as the company's high-end mobile phone touch screens, ultra-thin tablet cover glass, and metal mesh, etc., are not taken into account, it is estimated only according to the bottom line of performance promised by Shenyue Optoelectronics, and the calculation of fully diluted EPS according to the increase limit. After full dilution, the company's net profit for 13/14/15 was 0.08/1.12/136 billion yuan, and the corresponding EPS was 0.03/0.49/ 0.60 yuan, an increase of 1400%/22.4% year on year. The dynamic PE in 14/15 was 26.6/21.7 times, respectively. Even under relatively conservative valuation situations, there was a clear shift in the company's performance and valuation after the merger and acquisition, and the company as a whole entered a stage of healthy growth, giving it a “strong push” rating.