Main points of investment:
The performance was lower than expected and the increase in costs led to a decline in profits. The operating income of Aerospace Changfeng in the first half of 2017 was 515 million yuan, an increase of 15.60% over the same period last year; the net profit of return to the mother was 124300 yuan, down 98.85% from the same period last year; and the net profit of non-return was-3.0033 million yuan. The company's comprehensive gross profit margin was 23.03%, which was basically the same as that in the same period of 2016. The decline in corporate profits is due to an increase in costs caused by higher management fees. From the perspective of sub-business structure, security technology business is still the company's main source of income. During the reporting period, subsidiary Changfeng Technology realized sales income of 337 million yuan, an increase of 21.16% over the same period last year, but the proportion of its own products is relatively small. Lack of market-oriented, large-scale pillar products.
Merger and acquisition of quality assets to enhance overall profitability. Aerospace Changfeng recently issued an asset restructuring plan to acquire 51 per cent of Jingyi Planning and 51 per cent of Parker Xinneng by issuing shares and paying cash, with transaction consideration of 140.25 million yuan and 255.51 million yuan respectively. 30% of the transaction consideration is paid in cash, 70% is paid in the form of shares, and the issue price is proposed at 26.25 yuan per share. At the same time, the company plans to raise no more than 177 million yuan of matching funds for non-public offerings, which will be used to pay the cash consideration of the underlying assets, restructuring-related expenses and to increase capital to Burke Xineng (for investment projects). In addition, the original shareholders of Burke Xinneng and Jingyi Planning respectively made performance commitments: the net profit of Burke Xineng from 2017 to 2019 is not less than 31.8755 million yuan, 40.2862 million yuan and 48.6692 million yuan respectively; in the same period, the net profit of Jingyi planning is not less than 17.0215 million yuan, 2077.10 million yuan and 2509.24 million yuan.
Expect the company and the assets of the two bids to give full play to the synergy of the industrial chain. The two targets of this restructuring are related to the company's security technology business. Among them, Burke Xinneng is an IT infrastructure and power quality service provider, mainly engaged in UPS power, EPS power series products and provide overall solutions, the downstream market covers high-speed rail, military, municipal and other industries that require high stability and sustainability of power supply. Jingyi Planning is a geographic information product supplier integrating data collection, software development and integration services. Its main business is to provide overall GIS solutions to the public security system, and customers are concentrated in Guangdong Province. Through this reorganization of Burke Xinneng's power products and Jingyi's planned police geographic information system, the company will supplement the shortcomings of Aerospace Changfeng's products in the security field and transform the company from a security industry system integrator to a product and operation and maintenance service provider. it will help to improve the profitability of the business. On the other hand, Burke Xinneng and Jingyi Planning can also make use of the brand advantages and customer resources of Aerospace Changfeng in the field of security to speed up market development.
Profit forecast and valuation. As this asset restructuring has yet to be approved by the CSRC, we do not consider its impact on the company's performance thickening and equity dilution for the time being. We estimate that the EPS of Aerospace Changfeng from 2017 to 2019 is 0.19,0.24 and 0.27 yuan per share, respectively. On August 21, 2017, the closing price was 20.01 yuan, corresponding to the valuation of PE in 2017 at 104 times, higher than the valuation level of comparable companies. We will not give the company target price and investment rating for the time being.
Risk hint. Asset restructuring has yet to be approved by the CSRC; fierce competition in the security business has led to a decline in gross profit margin.