Incident: It was announced on March 14 that the company plans to acquire 51% of Zhongzhu Tianyou's shares for 210 million yuan and that it intends to acquire 51% of Langhui Optoelectronics's shares for no more than 255 million yuan.
1. Acquire Tianyou Zhongzhu and Langhui Optoelectronics to increase outdoor LED lighting business
Both Zhongzhu Tianyou and Langhui Optoelectronics are professional outdoor lighting companies. Both have professional qualifications such as “Urban and Road Lighting Professional Contracting Level 1”. Through the acquisition of Zhongzhu Tianyou and Langhui Optoelectronics, the company can further enhance the company's market competitiveness in LED lighting, especially in municipal engineering and landscape lighting, which is conducive to enhancing the company's industry position in the lighting market segment, promoting the formation of upstream and downstream synergies in the LED business sector.
2. Equity bundling+performance commitment to establish a continuous growth trend in the future
These transactions are all cash transactions, and all have arrangements such as equity binding and performance promises to establish future performance growth trends: (1) The counterparty should purchase company shares in the secondary market at a partial transaction price within 90 days from the target equity delivery date. Among them, the trading parties of Zhongzhu Tianyou/Langhui Optoelectronics each purchased shares corresponding to 60% of Langhui Optoelectronics's 51% equity consideration; (2) Zhongzhu Tianyou/Langhui Optoelectronics's 2018-2020 performance promises were 4,500/480062.4 million yuan, respectively. /6500/84.5 million yuan.
3. Strong industry demand, optimized competitive patterns, and the company's LED business continues to develop healthily
Against the backdrop of continued strong demand for the global LED industry and the continuous transfer of production capacity from the entire industry chain to the mainland, the domestic competitive environment and structure of China's LED industry continues to be optimized, mainly reflected in the continuous increase in the concentration of China's LED chip and LED packaging industry. The company has been deeply involved in the field of LED lighting and packaging for many years. As a domestic scale and technology-leading LED packaging and lighting enterprise, we judge that the optimization of the competitive pattern of the LED industry in the next 2-3 years will enhance the company's overall competitiveness and profitability.
4. Collaborative and diversified development and continuous mergers and acquisitions to create a closed loop in the Internet advertising industry
The company began entering the Internet marketing industry through mergers and acquisitions in 2015, strategically building its second main business. Since 2015, the company has completed the acquisition of Nisshang Optoelectronics (advertising and lighting), Billian Wireless (mobile marketing), Dingsheng Yixuan (real estate home marketing), and Vientiane Xindong (mobile precision marketing). In January 2018, the company completed the acquisition of Hangzhou Xinli Media (TV advertisement). Through continuous investment and merger and acquisition integration, the company has now accumulated rich experience and customers in the field of advertising and marketing, as well as a complete industrial chain layout, and is expected to continue to develop rapidly in the future.
Investment advice: In view of the new consolidated entities, we raised the company's net profit forecast for 18-19 to 353/457 million yuan (the original value was 307/396 million yuan), the EPS was raised to 0.40/0.52 yuan (the original value was 0.35/0.45 yuan), and the target price was raised from 7.6 yuan to 8.8 yuan (corresponding to PE 22 times in 2018) to maintain the purchase rating.
Risk warning: Internet marketing business performance falls short of expectations; risk of loss of goodwill from acquisition
