Core viewpoints

Transfer of shares at a premium of 22%: the company announced that Wen Kaifu, the controlling shareholder, and other shareholders of the company will transfer 15% of the total share capital of the company to Fujian Electronic Information Group, of which Wen Kaifu himself transferred about 154 million shares, while other shareholders transferred about 315 million shares, accounting for 4.93% and 10.07% of the total shares of the company, respectively, and the rest of the transferred shareholders have not yet been determined. The share transfer price is 6.86 yuan per share, a premium of 22% on the basis of the stock price before the suspension. After the completion of the transfer, the company's controlling shareholder will be changed to Fujian Electronic Information Group.

Share transfer has multiple advantages: 1) Fujian Electronic Information Group has a number of electronic-related industries and has business cooperation with the company, and the two sides plan to cooperate to carry out 5G projects in the future; 2) the state-owned assets background has more advantages for the company's financing scale and financing costs; and 3) the transfer of equity can solve the risks such as equity pledge, which is most worried by the market.

The outlook for the first three quarters sets the full-year forecast: the company forecasts a net profit of 11.8-1.28 billion yuan in the first three quarters, an increase of 30% 40% over the same period last year, with a median range of 1.23 billion yuan. The 18-year net profit of Q1 and Q2 is 290 million yuan and 400 million yuan respectively, and the median of the first three quarters corresponds to the net profit of 530 million yuan of Q3. Usually Q4 is the peak season of consumer electronics, and we think there is no worry about the annual performance.

Financial forecasts and investment suggestions

We forecast that the annual EPS of the company in 18-19-20 will be 0.57 PE 0.81 and 1.05 yuan respectively. According to the comparable company, the company will value the company 15 times in 18 years, and the corresponding target price will be 8.55 yuan, maintaining the buy rating.

Risk hint

The transfer of equity is still uncertain; the development of touchscreen business and camera business may not be as expected, and the progress of wireless charging may be slower than expected.