This report is read as follows:
The purpose of this transaction is to divest industrial assets and focus on the development of financial business. With the optimization of the company's asset layout and the substantial improvement of the capital strength of Guosheng Securities, we are optimistic about the performance of the company after the transition period of integration.
Events:
According to the announcement on July 1st, the company intends to transfer its 100% stake in Huasheng Industry to Hongye Riejin at a cost of 320 million yuan.
Comments:
Divest industrial assets and focus on the development of financial business. Huasheng Industrial is the operating platform of the company's manufacturing business, and its main business is the existing business before the company's restructuring in 2016. In 2015, after the actual controller of the company was changed to Mr. du Li and his concerted actor, Mr. Zhang Wei, the company decided that the long-term development strategy was to gradually establish a financial service system covering securities, insurance, investment, trust and other businesses, and finally build the company into a professional, innovative and open comprehensive financial services platform. The company plans to sell 100% equity in Huasheng Industrial to related parties for 320 million yuan. The purpose of this transaction is to divest assets not related to the financial business and concentrate resources on financial business.
Optimize the layout of assets and be optimistic about the performance after the transition period of integration. (1) the transaction price is based on Huasheng's net assets to consider the possible future employee settlement fee of 35.33 million yuan, so this transaction is expected to reduce the company's pre-tax profit by about 35.5 million yuan. The impact on the company's performance is very limited (16 years' pre-tax profit of 680 million yuan). (2) after the completion of this transaction, the company will return 320 million yuan in cash, which will help the company to concentrate funds for the development of financial business. (3) on June 19, the company's board of directors passed a motion to increase capital by 1.9 billion yuan to Guosheng Securities. The divestiture of industrial assets further optimizes the company's business layout, which is conducive to concentrating resources to promote the development strategy of the integrated financial services platform. With the optimization of the company's asset layout and the substantial improvement of the capital strength of Guosheng Securities, we are optimistic about the performance of the company after the transition period of integration.
Maintain the "overweight" rating and maintain the target price of 28.75 yuan per share. After the completion of this transaction, the company will return 320 million yuan in cash. With the optimization of the company's asset layout and the substantial improvement of the capital strength of Guosheng Securities, we are optimistic about the company's performance after the integration transition period. Maintain the company's 2017-19 EPS 0.68max 0.81 pound 0.99 yuan, maintain the target price of 28.75 yuan per share, corresponding to 2017 42XPE, increase holdings.
Risk Tip: financial control layout is not up to expectations, brokerage performance growth is not up to expectations.