Main points of investment:
Domestic cleaning equipment leader, the strategy focuses on the development of the main industry. The company is a major industrial precision cleaning equipment manufacturer in China. It has been immersed in the industry for nearly 20 years and has 88 patents on hand. It has realized import substitution in many fields such as flat panel display, consumer electronics, photovoltaic and so on. The company's business covers precision cleaning, water treatment and electroplating. Since 2017, the company began to focus on precision cleaning business. Revenue from cleaning products in the first half of the year reached 103 million yuan, an increase of 32.21% over the same period last year. Revenue from electroplating products and water treatment products reached 0.14 yuan and 34 million yuan respectively, down 22.04% and 28.80% respectively.
The proposed acquisition of Julius Baer cuts into the field of panel assembly equipment, and the performance is expected to increase significantly. In May 2017, the company announced that it planned to buy 100% of Baer Automation by issuing shares and paying cash, with a transaction consideration of 618 million yuan. At the same time, it planned to raise 172 million yuan from no more than 10 specific targets. Baosheng Automation is one of the few equipment suppliers covering all nine processes of the display screen. At present, it has fully mastered CCD visual alignment patch technology, AOI visual inspection technology, precision servo control technology, OCA optical adhesive bonding technology, glass substrate cleaning and grinding technology, backlight combination welding technology and other equipment manufacturing technology, downstream customers include BOE, Samsung and so on. According to the performance bet agreement, Julius Baer's 2017-19 non-net profit is not less than 4500, 5850, 76.05 million yuan; as of May 31, 2017, Julius Baer Automation has confirmed sales revenue of about 27 million yuan, has signed unexecuted orders of about 110 million yuan, is expected to sign new orders for the whole year of 2017 will reach about 250 million yuan, the future is expected to significantly increase the company's performance.
The OLED industry is growing rapidly and the company is expected to fully benefit. According to IHS, under the influence of the launch of OLED panels, the global expenditure on assembly equipment for flat panel display modules will reach $11.6 billion in 2017; with the gradual adjustment of the flat panel display supply chain, it is estimated that more than 300 million additional OLED panels will be produced annually by 2018. In this context, the development of the company is expected to fully benefit, mainly reflected in two aspects: first, the iteration of precision cleaning equipment brought about by the launch of OLED products, which can directly bring flexibility to the company's main business; second, the company's merger and acquisition of Julius Baer actively layout the OLED industry, and its performance is expected to enter a rapid upward channel.
For the first time, coverage gives an "overweight" rating. Based on the principle of prudence, we forecast the company's performance in two situations: 1) regardless of the impact of the merger and acquisition of Baer, it is estimated that the company's return net profit in 2017-19 is 0.21,0.32 and 39 million yuan, corresponding to EPS 0.21,0.32,0.39 yuan per share. 2) considering the impact of merger and acquisition on the company's performance, it is estimated that the company's 2017-19 preparation test return net profit is 0.66,0.91 and 115 million yuan. The corresponding EPS is 0.57,0.78,0.99 yuan per share, according to the latest closing price of 30.56 yuan, the corresponding PE is 54,40 and 31 times, respectively. We think that the company is expected to fully benefit from the development of the OLED industrial chain through the way of endogenesis + extension, giving it a "neutral" rating for the first time.
Risk hints: the growth of the company's main business is not as expected; the development of the OLED industry is not as expected; the risk that the company fails to pass the administrative examination and approval of issuing shares to purchase assets; and the risk that the actual performance of the proposed acquisition company is lower than the promised expectation in the future.
