Item:
The company recently announced that it would buy a 70% stake in Shandong Ackway with its own funds, valuing it at 18 times the deducted non-net profit after audit in 2017.
Main viewpoints
1. A brief Analysis of the underlying assets of Shandong Ackway
According to the company's announcement, Xilong Science has signed a framework agreement with the trading party, under which the listed company will acquire a 70% stake in the underlying asset, Shandong Aikewei, in cash. The underlying asset valuation will be priced at 18 times PE based on the net profit after the audited deduction in 2017. The corresponding amount cannot be determined at present, and we calculate it on the basis of the business and performance of the underlying assets disclosed by the company:
Ackway's 2016 income was 37.6 million yuan, net profit was 9.4449 million yuan, net profit margin was 25%. From January to September 2017, the income was 45.96 million yuan, the net profit was 24.48 million yuan, and the net profit margin was about 53.3%. Judging from the situation in the first three quarters of this year, the annual income is estimated to be about 61 million yuan and the net profit is estimated to be about 30 million yuan by linear extrapolation according to the average distribution of a single quarter. The net profit margin of the underlying assets is about 50%. At present, the A-share related listed companies have not been able to achieve this profit level.
However, from the company announcement and other public information (Eckway website, cfda), the underlying asset business is different from A-share related listed companies. Shandong Eckway's business mainly includes molecular diagnostic products and related services, and its applications mainly cover epidemic diseases (infectious diseases) and food safety. The company's technology platform includes multiple PCR, RT-pcr, high-throughput sequencing and mass spectrometry and other advanced technologies and application platforms. At the same time, the company is recognized as the national gene testing technology application demonstration center by the National Development and Reform Commission, and the company has the qualification of a third-party medical laboratory and the qualification of providing nucleic acid diagnostic services for clinic. It can be inferred from the above information that the products and services provided by Shandong Aikewei include both clinical and non-clinical fields, the clinical field, if the company has the qualification of a third-party medical laboratory, it can cooperate with medical institutions in the field of clinical laboratory projects and scientific research. If it is a non-clinical application, diagnostic reagent products do not need to obtain the medical device registration certificate issued by cfda, and the price formation mechanism of products and services is less affected by the current medical control fees and other policies, so it is possible to achieve higher profit margins.
Therefore, according to our linear extrapolation forecast for Shandong Ackway's annual income and net profit in 2017, if the net profit in 2017 is about 30 million yuan, according to the company's framework agreement, 18 times pe will be given, then the underlying assets will be valued at about 500 million yuan (or more), and the listed companies will acquire 70% equity corresponding to more than 350 million yuan.
two。 Further layout in the field of health care, the technology platform continues to enrich the layout of Xilong Science in the field of medical and health steady progress, from the New World biology, Hunan Yonghe Sunshine, to fulgent, Fujian Fujun gene, and now Aceway, in a few years, from the field of chemical reagents into the IVD industry, from the field of biochemical diagnosis in the IVD industry, through investment mergers and acquisitions infiltrated into the field of genetic testing Invest in overseas genetic testing service company fulgent, and then set up our own genetic testing service company in China, introducing foreign advanced equipment and technology. This time, we will invest in Shandong Eckway, which not only expands the testing technology platform horizontally (genetic testing and mass spectrometry technology), but also expands the application field. NGS technology is the direction and trend of clinical gene detection in the future, but in the short and medium term, amplification technology and mass spectrometry technology have more realistic commercial application value, so we think that Shandong Eckway will be an important step in the layout of Xilong Science in the field of medical and health care.
3. There may be a substantial increase in performance.
In the first three quarters of this year, the company's overall operating income was 2.39 billion yuan, belonging to the parent company's net profit of 63 million yuan. According to the company announcement, the original shareholders of Shandong Ackway made a performance commitment to achieve a net profit of 35 million yuan, 40 million yuan and 45 million yuan respectively from 2018 to 2020, and arranged a compensation scheme. According to this performance commitment, it will have a relatively obvious thickening effect on the company's performance in the next three years.
4. Investment advice:
The announcement of the company is only a framework agreement, the specific implementation time there is still some uncertainty. Regardless of the increased performance brought about by this acquisition, we expect the company's net profit from 2017 to 2019 to be 72 million yuan, 80 million yuan and 90 million yuan respectively, the EPS is 0.12,0.14,0.15 yuan respectively, and the corresponding PE is 147,131,117times respectively. If we consider the equity acquisition of Ackway, according to the company's shareholding ratio and the performance commitment from 2018 to 2019, the company's net profit is 108 million yuan and 122 million yuan respectively, EPS is 0.18 yuan and 0.21 yuan respectively, PE is 100 times and 86 times respectively. This acquisition will significantly enhance the company's performance and have a positive impact on the company's layout in the health care sector, but we give the company a "recommended" rating considering that the company's valuation is still high.
5. Risk Tips:
The uncertainty of the specific timing and plan of the acquisition; the risk of new business expansion in the medical field; the fluctuation risk of the original business.
