Main points of investment:
The fixed increase plan has passed, and the company plans to use 34.03 yuan per share for no more than 32.32 million non-public offering shares and no more than 1.1 billion yuan to raise funds, all of which will be used to acquire 100% equity of Xiongwei Seiko. Majestic Seiko specializes in automobile body systems, mainly producing seat frames and parts, body accessories and related moulds (seat structure income accounts for more than 70%, safety parts account for about 15%). The business has developed steadily, with a compound growth of 20% and 30% in sales revenue from 2006 to 2016. The other party promised that the net profit of Xiongwei Seiko in 2016 and 2017 would not be less than 115 million yuan and 125 million yuan respectively, and the cumulative net profit in 2016, 2017 and 2018 would not be less than 375 million yuan. In fact, the audited net profit of Xiongwei Seiko in 2016 and 2017 is 154 million yuan and 86.64 million yuan respectively, and the net profit in 2017 and 2018 is expected to be 142 million yuan and 149 million yuan respectively, which is expected to significantly exceed expectations.
The rise in raw materials dragged down the gross profit margin, which was lower than the growth of the main business of income-generating companies, mainly due to a pick-up in downstream market demand, optimizing product structure and increasing market sales of new products. The rise in the price of raw materials such as ferrochromium has led to a serious decline in gross profit margin, which is 5.33pct lower than the same period last year. The rate of expenses for the three items remained stable; the accounts received in advance for the current period totaled 18.23 million yuan, an increase of 52.78 percent over the same period last year. In addition, the company's new "grinding ball high-speed rolling process and intelligent production line equipment development" project related equipment installation and commissioning, has been gradually put into use; the new product bimetal composite hammerhead has begun to supply Polish copper industry, the company is expected to optimize the company structure, improve product gross profit margin, so as to continue to improve profitability.
Cut into the auto parts market, dual-main blueprint set sail with the help of the platform of listed companies, majestic Seiko has signed a long-term supply agreement with Otto Liv this year, and entered the supply system of Kasma and Entanhua. The original five core customers Yanfeng Johnson, Foggia, Boze, Takata, Magna, Autoliff expanded to 7eight core customers, and the order basically belongs to the platform project, with strong sustainability. The production capacity of Yancheng, Changchun, Yizheng and other factories will be further released, at the same time, the extension of horizontal product line will be strengthened and expanded to large and complex parts. Through this transaction, the company quickly cut into the auto parts market, and will realize the two-wheel drive of wear-resistant materials and auto parts business in the future.
Earnings forecast and rating: maintaining the overweight rating is based on the principle of prudence. When the private placement is not finally completed, the dilution of equity and the impact on performance are not considered for the time being. It is estimated that the company's earnings per share in 2017, 2018, 2019, will be 0.06, 0.11, 0.13 yuan respectively. If the additional offering is successfully completed, the company's earnings per share in 2018 will be 1.54 and 1.79 yuan, respectively. Corresponding to the current stock price PE of 20max 17 times, the current performance of the main business is at an all-time low, the company to promote the manufacturing-based diversification strategy layout is imperative to maintain the overweight rating.
Risk tips: the risk that the non-public offering can not be completed successfully; the performance commitment of the new business has not been fulfilled; the uncertain impact of raw material price fluctuations on the company.