Main points of investment:

Event: the company's major asset restructuring issued a preliminary plan to purchase 88.23% of the shares of Millennium Design by issuing shares and paying cash from 31 other parties, such as Millennium Investment, instead of publicly issuing shares to raise supporting funds, with a total amount of no more than 574 million yuan. The transaction price of the underlying assets is about 1.429 billion yuan, of which 881 million yuan is paid by issuing shares, and the remaining 548 million yuan is paid in cash. The issue price of the shares issued for the purchase of assets shall not be less than 8.62 yuan per share, with a corresponding quantity of 102 million shares. Millennium Design achieved a net profit of 10,000 yuan 62.76 million yuan in 2016, promising that after deducting non-recurring profits and losses from 2017 to 2019, the net profit belonging to the shareholders of the parent company will not be less than 96 million yuan / 126 million yuan / 160 million yuan respectively.

Different from the public understanding: 1) extend and improve the upstream and downstream industrial chain, improve asset quality, and achieve thickening performance. Millennium Design, the target company, is a comprehensive design enterprise that provides all kinds of professional engineering "integration" design services for China's urbanization construction and urban-rural integration construction. it was listed on the new third board on September 17, 2015. mainly engaged in urban planning and design, municipal and highway engineering design, architectural design, landscape design, water conservancy project design and other aspects of design consulting services. The acquisition of Millennium Design by Wai Hai shares will help the company to further extend and improve the upstream and downstream industrial chain, give full play to the synergy between listed companies and target companies, and speed up the transformation of the company's business model from construction general contracting to project general contracting. And the profitability of Millennium Design ranks among the new third board design enterprises. Although the revenue of the target company accounted for only 13.22% of the income of Weihai shares in 2016, the net profit accounted for 67.74%. The acquisition helps to improve the asset quality of listed companies, thicken their performance and enhance sustainable profitability at the same time. 2) the actual price of this acquisition consideration is relatively high, and the accounts receivable are specially agreed to ensure the quality of income in the commitment period. This time, Weihai decided to buy 88.23% of the shares in Millennium Design, and the 100% equity price of the underlying assets is valued at 1.62 billion yuan, about 16.9 times the 17-year promised net profit. In addition, the transaction specifically requires that the net provision for bad debts deducted from the accounts receivable of the target company during the three-year performance commitment period must be fully recovered within five years from 2020 to ensure the quality of promised earnings. 3) strong execution, the layout of the second main business is worth looking forward to. The company will focus on building a professional service chain in the process of industrialization of the cultural and entertainment industry, providing key nodes of professional services and tools for the creativity, production, distribution and operation of film and television, animation, games and other content. The currently established subsidiary Orange Le Xin Entertainment has participated in the investment directed by Zhang Lijia and Jackie Chan starring in "Blood of machines", which is expected to be released from National Day 2017 to Spring Festival 2018, and acquired a 41% stake in film and television special effects company Juguang Picture Pictures, an important step in mergers and acquisitions of the second main business. 4) PPP has plenty of orders on hand, which will help accelerate the performance. The company has announced a total of 8.317 billion yuan in new contracts since 2016, about 3.79 times the 2016 revenue, of which PPP signed 6.314 billion yuan. In March 17, it completed a fixed increase of 2.47 billion yuan to raise funds, with an issue price of 7.87 yuan per share, of which 1.5 billion yuan was subscribed by major shareholder Weihai Holdings, which will be used for the first phase of the development of the PPP project in Cangshan Industrial agglomeration Zone and the construction-transfer project of reclamation on both sides of the Jiantang River to ensure the smooth progress of the project. At present, the company has sufficient orders on hand, and in the future, with the development of the second main business of culture and entertainment, it will enter a period of rapid growth.

Downgrade 17-18 profit forecast, add 19-year profit forecast, maintain "overweight" rating: the progress of some of the company's projects is slow, downgrade 17-18 profit forecast. It is estimated that the company's net profit for 17-19 years will be 158 million / 365 million / 565 million (the original net profit for 17-18 years is 340 million / 476 million), with a growth rate of 70%, 131% and 55% respectively, corresponding to a diluted PE of 70X/31X/20X (for the time being, only the share payment and additional issuance will be considered, excluding the additional issuance of supporting funds), and the shareholding rating will be maintained.