Event: the company announced on the evening of August 20 the revised draft of the preliminary plan for issuing shares to purchase assets and related party transactions, which will issue 195 million shares to Gansu State Investment Fund at 11.37 yuan per share for the acquisition of 100% equity in the engineering consulting group it controls, with a transaction consideration of 2.219 billion yuan. The cumulative net profit of the target company promised by Gansu State Investment Corporation from 2018 to 2020 is not less than 200.9189 million yuan, 423.898 million yuan and 667.3115 million yuan respectively.
With the injection of high-quality state-owned assets, the profitability has been significantly improved: the company is a large state-owned enterprise under the actual control of Gansu SASAC, which is mainly engaged in the production and sales of worsted wool, and the products have a trademark license for pure wool and wool blending in the International Wool Bureau. Has a high influence in the industry. Affected by the changes in the industry environment and other factors, the company's previous performance is under some pressure. The injected engineering consulting company integrates eight major companies in the field of engineering consulting in Gansu Province, involving construction, water conservancy, municipal engineering, geotechnical engineering and other fields. formed consulting planning, survey and design, technical services, engineering construction, engineering supervision and other integrated services, the controlling shareholder is the Gansu State-owned assets Supervision and Administration Commission, its 2017 annual operating income is 1.636 billion yuan, 5.85 times that of the company. The net profit of the company in 2018 is 79.2506 million yuan, and the cumulative net profit of the target company promised by Gansu State Investment Corporation from 2017 to 2020 is not less than 200.9189 million yuan, 423.898 million yuan and 66731.15 million yuan respectively.
The direction of business transformation is clear and the reform of state-owned enterprises will be the next city: this reorganization is an important measure for Gansu Province to deepen the reform of state-owned enterprises and optimize the industrial layout. After the completion of this transaction, listed companies will form a pattern of dual main industries in the engineering consulting service industry and the textile industry, which will help to further enhance the comprehensive competitiveness, market expansion ability, resource control ability and follow-up development ability of listed companies. The engineering consulting group will be listed as a whole, and the securitization rate of state-owned assets will be further improved, which will help it expand its development space and lay the foundation for building a professional and first-class domestic engineering consulting service group with full process, omni-directional and full life cycle.
Engineering consulting has great potential, and infrastructure warming is good for industries: engineering consulting services are intelligence-intensive and talent-intensive industries with high barriers. According to the outline of the 13th five-year Plan, the state's investment in infrastructure construction will be further increased. the construction of modern comprehensive transportation system, new urbanization, "Belt and Road Initiative" construction and ecological environment construction will be conducive to the development of transportation, municipal administration, construction and other industries. The recent meeting of the political Bureau of the CPC Central Committee once again mentioned the deficiency of infrastructure construction, the inflection point of infrastructure investment policy has already appeared, and the engineering consulting service industry in which the engineering consulting group is located in the future has a broad space for development.
Investment advice: we assume that the asset restructuring is going smoothly, and that the Engineering Consulting Group will fulfill its performance commitments in 2018-2020 and achieve the annual consolidated statement in 2019. It is estimated that the company's EPS in 19-20 will be 1.21,1.34 yuan respectively, and the previous share price PE will be 11 times and 10 times, respectively. The first time coverage will be given a neutral rating.
Risk tips: the environment of the wool textile industry has further deteriorated; competition in the industry has intensified; the company's asset restructuring is in the pre-planning stage, the process has a certain degree of uncertainty, and still faces the risk of restructuring failure.
