Event
Sign the "Asset purchase Agreement" to maintain Environmental Protection
On July 11, 2017, Science and Technology Environment issued an announcement announcing that it would acquire 100% stake in Yongbao Environmental Protection held by Wang Guiyu, Wang Jingyu, Qian Heqin and Changzhou Yongbao Investment Management Partnership in cash. The transaction is divided into two stages: 70% of the equity in this transaction, the remaining 30% in 2019, and the Asset purchase Agreement signed by both parties on July 9, 2017. In this transaction, the valuation of Yongbao Environmental Protection 100% equity is 585 million yuan, and the transaction consideration of the underlying assets of this transaction is 385 million yuan. In addition, the company announced the termination of the major asset restructuring previously announced, and shares resumed trading on July 12.
Brief comment
Mergers and acquisitions of hazardous waste targets have landed, and the environmental protection industry chain has been further expanded.
The company issued an announcement on June 29, 2017, announcing that it had signed a "framework agreement" on the acquisition of environmental protection. Environmental protection is based on harmless disposal, comprehensive utilization and water pollution treatment, and has an independent and complete integrated solution for hazardous waste collection, transportation, pretreatment, disposal and resource utilization. He has participated in the national 863 major science and technology project "bulk industrial solid waste treatment and resource utilization technology and demonstration".
The construction and harmless disposal technology is advanced. After the landing of mergers and acquisitions, the company will further improve the strategic layout of comprehensive environmental management, enhance the business strength of the hazardous waste plate, and effectively expand the industrial chain of environmental protection.
We believe that the landing of this agreement will send the following positive signals: 1) the company implemented the "Asset purchase Agreement" within half a month after signing the Framework Agreement, demonstrating the efficient management ability and strong capital operation strength of the management team. 2) it is clear that the transaction will be conducted in two stages, with 70% of the equity in this transaction and the remaining 30% in 2019 (the overall valuation will be revalued at 12 times the 2018 net profit of the underlying company, and 30% of the overall valuation will be used as the transfer price for the remaining 30% of the equity. ) on the one hand, it shows the company's confidence in the profitability of the underlying assets, on the other hand, it binds the interests of the counterparty to the transaction; 3) always maintain the environmental protection commitment to deduct the non-net profit of not less than 45 million yuan in 2017 and no less than 55 million yuan in 2018. Based on this, it is calculated that the price-to-earnings ratio of the acquisition is 11 times, and the valuation is reasonable.
The quality of the underlying assets is good, and the financial indicators are good.
Yongbao Environmental Protection is a leading enterprise in the field of hazardous waste in Jiangsu Province, with complete business chain and profound professional accumulation. In addition, through the observation of its 2016 financial data, it can be found that many indicators have excellent performance and good quality: 1) the operating income is 78.08 million yuan, the net profit is 31.41 million yuan, the gross profit margin is 63.8%, and the net profit rate is 40.2%. Strong profitability; 2) the net cash flow of operating activities is 28.5 million yuan, and the current income ratio is 36.5%. 3) the asset-liability ratio is low, only 18.2%.
The layout of the platform is becoming more and more perfect and the great-leap-forward development is worth looking forward to.
We believe that through years of layout, the layout of the comprehensive environmental protection platform is becoming more and more perfect: 1) in terms of atmospheric control, the company relies on the profound technical background of Xuzhou fuel Control Institute, Wuhan fuel Control Institute, and Hangzhou Blue Sky. It has full-chain business capabilities in combustion system, boiler body, and end flue gas treatment, and can provide customers with overall pollutant control services. 2) in terms of water environment governance, through the merger and acquisition of Inrogren, the company has the design, engineering and construction capabilities of municipal water affairs, industrial water treatment and water ecological environment, and recently signed a cooperation agreement with Henan Water Conservancy Bureau and Henan Water Conservancy Investment Group, showing strong resource strength, and the landing of related projects in the future is worth looking forward to. 3) in terms of solid waste treatment, the company has actively carried out business development, and many waste incineration power generation projects such as Zhucheng and Suining have been started one after another. This time, through the acquisition to maintain environmental protection, the business chain will be further extended to the field of hazardous waste. Create new profit growth points and effectively enhance market competitiveness.
From the perspective of strategic layout, the company reached cooperation agreements with local governments and state-owned enterprises through the strong resource advantages of the team, and obtained more orders by sharing the project storehouse. Further improve the company's comprehensive strength in the construction and operation of water environment comprehensive management projects; the layout in other sub-areas is still not lax, continue to acquire high-quality targets to improve the construction of environmental protection platform, the prelude of great-leap-forward development has been opened.
In April this year, the company's actual controller, Chairman Mao Fengli and the company's directors, supervisors and senior managers (management team) announced that they planned to increase their holdings in the company through the trading system of the Shenzhen Stock Exchange within 12 months, with a lower limit of 100 million yuan and an upper limit of 1 billion yuan. This time, the actual controller and the senior management team intend to use their own or self-raised funds to increase their holdings at a price of 15 yuan per share, compared with the company's closing price of 7.89 yuan per share before suspension, the premium is obvious, which fully shows that the management of the company is optimistic about the environmental protection industry for a long time. and firm confidence in the future sustainable development, after completion will further strengthen the management and control of the company's business development. In addition, Dong Jiangao, a company participating in the plan, promised not to reduce its holdings within six months.
Maintain the buy rating
After taking ownership of Fengli Capital, the company's operation has been optimized in many aspects, such as business management and capital operation. In addition, the first phase of the equity incentive plan of the company has been awarded and completed, including 182 directors, senior managers, core technical (business) personnel, etc., and the net profit in the exercise conditions has increased significantly compared with the same period last year, indicating that the company will usher in great-leap-forward development. It is optimistic that the company's cooperation agreements have landed projects one after another, resulting in incremental performance; at the same time, continue to look for high-quality environmental protection targets, through the industrial investment fund to improve their own business layout. The company is expected to achieve net profit of 1.63 yuan and 204 million yuan in 2017 and 2018 respectively, corresponding to 0.23 yuan and 0.29 yuan of EPS, maintaining the buy rating.
