Main points of investment:
Events. On August 10, 2017, Guangdong Guanghong Holdings Co., Ltd. announced that the company's wholly-owned subsidiary Guangdong Education Bookstore Co., Ltd. (hereinafter referred to as: education Bookstore) made a unified capital increase on its 62 shareholding joint ventures (hereinafter referred to as: target enterprises), with a total investment of 13.05 million yuan, all of which came from the education bookstore's own funds. After the completion of capital increase and share expansion, Education Bookstore uniformly holds 51% of its 62 associated enterprises, and the target enterprises are included in the scope of the consolidated financial statements of Education Bookstore.
Strengthen the control of distribution channels to prepare for the subsequent development of book distribution business. Through this capital increase and share expansion, the company will control the original 62 associated enterprises. On the one hand, it strengthens the control over the distribution channels, which is conducive to the development of the company's business in the field of book distribution, to further optimize the strategic layout of the company's education and culture-related industries, and to integrate the upstream and downstream resources of the company. With the help of the company's brand value, cooperate with the company's existing main business, realize the integration of resources and complementary advantages, and promote the benign, effective and sustainable development of the company's educational and cultural business. Enhance the industry competitiveness and comprehensive strength of the company On the one hand, this increase in capital and shares can strengthen the state-owned control of capital, which is conducive to promoting enterprises to become stronger, better and bigger. First, it is conducive to the in-depth implementation of the "two-wheel drive" development strategy of teaching materials distribution and market product management, and strives to improve the level of large-scale and intensive specialization, and second, it is conducive to conforming to the trend orientation of the new technological revolution and the development of the cultural industry. seize the historical opportunities of cultural system reform, cultural market demand and capital operation space expansion, and strive to promote the rapid development of the company with the innovation of products, services, technology and management. With reform and innovation, transformation and upgrading as the driving force, we will accelerate to become a diversified new type of educational and cultural industry group enterprise with the book industry as the core and the education industry as the support. We believe that this capital increase and share expansion also reflects the determination of the enterprise management team to become bigger and stronger.
Investment advice and performance forecast. We believe that Guanghong (1) combined with the advantages of background resources, recent system optimization actions, regional national reform goals, the company's strategic upgrading demand is obvious. On the one hand, in the education industry, Guanghong has a leading channel advantage in Guangdong Province, strong cooperation in grafting educational resources and expanding product lines, relatively solid financial foundation, steady growth in income and profitability, abundant cash reserves, low debt ratio and other characteristics, financial strength to build a strong backing for transformation and upgrading. On the other hand, the company is not deeply involved in other areas of education industry other than teaching materials and teaching, and still needs to cooperate to shorten the learning curve. (2) valuation has a certain margin of safety: the company's original industrial land is in the process of urbanization in Guangzhou, Zhongshan, Panyu, etc. the possibility and necessity of changing land use and significantly increasing value is also in line with the inherent needs of the company's strategic upgrading and optimizing asset structure. The company's original double main business has a unique regional monopoly advantage, facing the background opportunity of consumption upgrading and steady growth of income and profit.
Based on the development trend of the existing business, regardless of the possible future capital operation, we predict that the net profit of the company in 2017 and 2018 is 127 million and 141 million respectively, and the corresponding EPS is 0.22 yuan and 0.24 yuan respectively.
Combined with the valuation level of the listed companies in the same industry, the profit contribution of the two main industries of the company, and the background trend of the company's strategic upgrading, we will initially give 53 times PE in 2017, corresponding to the target price of 11.66 yuan per share, and maintain the buy rating.
Risk hint. Extension, land activation is not as expected, food cold chain, teaching material distribution industry risk, market risk and so on.
