Main points of investment:

The company is the leading enterprise in the domestic zipper industry, and its sales volume ranks first in the country for many years. 1) the company is mainly engaged in zipper production and sales, with steady growth in revenue and profit, and a compound growth rate of 6% in the past five years. 2) relying on the five bases of Jinjiang, Shanghai, Tianjin, Dongguan and Chengdu in Fujian, the company forms a nationwide marketing network system, occupies a dominant position in the domestic middle market, and gradually grabs high-end market share with international giants. At the same time, actively expand overseas markets, products are exported to more than 70 countries and regions. 3) in the past 16 years, precision manufacturing has been actively promoted to strictly control costs, and remarkable results have been achieved. By adjusting and optimizing the product and customer structure, the company increased the sales of strip zippers for high gross margin products, and the internal effect improved significantly. 2017H1 realized revenue of 700 million yuan, an increase of 25.9 percent over the same period last year, and the net profit of returning home was 64.19 million yuan, an increase of 2 percent over the same period last year.

The company plans to buy 65% of the shares in the chain of prices with 1.01 billion yuan in cash, making great strides into a new blue ocean of cross-border e-commerce and opening up a new profit growth point. After the completion of the acquisition, the company became the fourth A-share company to set foot in cross-border e-commerce. The price chain promises that the net profit for 17-19 years will not be less than 100 million / 160 million / 250 million yuan respectively. At the same time, as an upstream supplier of the clothing industry, Xunxing has the ability to integrate the industrial chain, which helps to expand the price chain to clothing categories and expand the scale of business.

The price chain implements the trinity strategy of "brand e-commerce + e-commerce software + e-commerce community". It is a domestic scarce high-quality cross-border export e-commerce integrated service provider. 1) Brand e-commerce: the company promotes branding and boutique strategy, and actively creates best-selling "hot products". The company has long focused on cross-border B2C export business, and its sales in 2016 increased by 19.7% year on year to 410 million yuan, with a rapid development momentum. The company's own brand DBPOWER covers a number of 3C categories, a number of items are well received on Amazon.Com Inc, with a small amount of SKU to achieve efficient sales. Under the boutique strategy, the company's profitability has achieved a step-by-step improvement, operating capacity and employee efficiency are currently in the forefront of the industry, operating conditions are healthy and sound, and it is a model of "small and beautiful" cross-border e-commerce enterprises. 2) E-commerce software: the software business is the second core business segment of the company, which strengthens the brand and enhances the user experience with software. The company uses AMZtracker and global trading assistant unified platform software to provide comprehensive B2C cross-border e-commerce software services, data analysis, accurate data marketing and other services for platform sellers. In 2016, the operating income of e-commerce services reached 50.05 million yuan, accounting for 11.0% of the company's total revenue. The ultra-high gross profit margin of 80% of the software business led to a substantial increase in the overall gross profit margin. 3) e-commerce community: the company uses vipon.com, Broadway cross-border e-commerce alliance and offline community to push its cross-border e-commerce operation experience and full-process software services to global e-commerce sellers, share industry resources, and achieve effective docking with the company's software to facilitate the promotion and use of software to realize the realization of resources. The price chain has gradually changed from a single e-commerce enterprise to a cross-border export e-commerce integrated service provider that integrates brand e-commerce, e-commerce software and e-commerce community and interacts online and offline.

The dual main business strategy of "zipper + cross-border e-commerce" is expected to achieve high performance growth. It is optimistic about the rapid growth of the cross-border e-commerce industry and the synergy of the dual main industries, covering the "overweight" rating for the first time. The price chain is expected to merge at the end of 17 years. It is expected that the listed companies will achieve a net profit of 1.4 / 300 million in 17-18-19, and their EPS will be 0.39, 0.66 and 0.85 yuan respectively. The current price corresponding to PE in 17-19 will be twice as much as that in 37-22-17. The zipper business is valued at 25 times, and the cross-border e-commerce business is valued at 40 times, corresponding to a target price of 17 yuan in 2017, giving a "overweight" rating for the first time.

Investment case

Investment rating and valuation

The company is the leading domestic zipper enterprise, after the acquisition of high-quality cross-border e-commerce enterprise price chain, "zipper + cross-border e-commerce"

The two main business strategies cooperate with each other and are expected to achieve high performance growth. It is optimistic about the rapid growth of the cross-border e-commerce industry and the synergy of the dual main industries, covering the "overweight" rating for the first time. We expect the company to achieve a net profit of 1.4 / 300 million in 17-18-19, respectively, with an EPS of 0.39, 0.66 and 0.85 yuan, respectively, and the current price corresponding to the 17-19 PE is 1. 4 times that of 37-22-17. Give the zipper business 25 times valuation, the price chain business 40 times valuation, corresponding to the 2017 share price of 17 yuan, for the first time to cover the "overweight" rating.

Key hypothetical point

1) the company's original zipper business achieved revenue of 1.28 billion / 1.36 billion / 1.47 billion yuan in 17-19, an increase of 9%, 7% and 4% over the same period last year.

2) the income of the price chain business reached 1.04 billion / 1.57 billion / 2.21 billion yuan in 17-19, specific to each business:

The revenue of brand e-commerce business was 990 million / 1.5 billion / 2.12 billion yuan in 17-19, an increase of 142%, 52%, 42%, and 52 million / 69 million / 83 million yuan, an increase of 8%, 32%, 20%, respectively. E-commerce community business assumes that it does not contribute directly to income.

Different from the public's understanding

The market may think that this transaction is due to the desire of the founding team to realize, and the later performance will be affected after the original team is separated from the core operation after the completion of the acquisition. We believe that this acquisition is mainly due to the demand of the financial investors in the chain of price, and the original controller Ganxian and Zhu Ling only transferred half of their shares. After the completion of the transfer, Gan Weizao and his wife and their common dream (the company's employee shareholding platform) still hold 31.3% of the shares, are still responsible for the actual operation of the price chain, and undertake the performance commitment obligations of this acquisition, and the company's original team has the determination to operate for a long time.

At present, the price chain is small in volume and fast in growth, and will fully enjoy the dividend of the rapid development of the industry. At the same time, Xunxing shares, as a leading enterprise in the zipper market, has been ploughing the clothing industry for a long time and has the ability to integrate the industrial chain. after the acquisition, the dual main business strategy of "zipper + cross-border e-commerce" is coordinated with each other, and the price chain can take advantage of the strength to expand the clothing category. Please climb to another high-rise.

Catalyst for stock price performance

1) popular sales styles appear in the price chain; 2) obvious synergy to expand clothing categories; 3) the capitalization process of cross-border e-commerce is further accelerated.

Core hypothesis risk

1) the risk of policy change in cross-border e-commerce; 2) the risk of global trade environment