Events:
Xinlong Electric Appliance issued an announcement on October 14 that in order to expand the company's main business and sales market, it acquired the project of Suzhou switch No.2 Factory Co., Ltd. with monetary cash. After completion, it held a total of 70% equity in Su Erkai, with a total acquisition capital of 294 million yuan. The company takes June 30, 2015 as the benchmark date, and the valuation of the 100% equity of Su er Kai is 437.2282 million yuan. after friendly negotiation between the parties to the transaction, it is determined that the final value of the 100% equity of Su er Kai is 420 million yuan, and the final transaction price of 70% equity is 294 million yuan.
Main points:
Acquisition of important private enterprises in the industry
Su er Kai is a manufacturer specializing in the production of complete sets of electrical equipment with a history of nearly 30 years. Up to now, it has formed an annual production scale of tens of thousands of high and low voltage switchgear cabinets with an annual output value of 200 million yuan. In terms of production technology, it has become a well-known brand in the industry in cooperation with Schneider switch Company and German Muller Company. He has successively undertaken major projects such as the Shanghai World Expo Exhibition Hall and Suzhou Rail Transit. Su er Kai promised a net profit of 460,000,000 yuan from 2015 to 2017, or an average annual revenue growth of 15 percent.
Prepare for charging piles to expand high-speed rail transit and build full-service chain service providers this acquisition is a market opportunity for Xinlong Electric Appliances to vigorously develop high-speed rail, new energy vehicle charging piles, urban rail transit, etc., and give full play to the competitive advantage of the intelligent manufacturing and equipment industry of complete sets of electrical appliances. Su Erkai's products are widely used in electric power, rail transit, metallurgy, coal, petrochemical, machinery, textile and other fields, taking over the rail transit 1 and lines 2 and 4 under construction in Suzhou, which basically occupy the rail transit construction market in Suzhou. The company uses the application field of Su er Kai products to get involved in the popular field of charging piles, while continuing to promote the application of equipment in high-speed rail and urban rail transit to resist the risk of insufficient demand in existing areas. After the company acquired Tianjin Teda Engineering Design Co., Ltd. to extend the industrial chain and formed a service provider to provide a package of power service solutions such as design, transmission and distribution equipment manufacturing, components, installation, etc., the company again acquired Su er Kai, an enterprise in the industry. while consolidating the original market, by covering more transmission and distribution business customers and expanding the business scale, the company began to integrate the industrial chain of the transmission and distribution industry. Gradually become a full-service chain service provider in the power transmission and distribution industry.
Enter the market of Jiangsu, Zhejiang and Shanghai with the help of Su er Kai
Xinlong has been around the strategic development opportunities of the Beijing-Tianjin-Hebei metropolitan area and the Bohai economic circle, but since 2013, the company's revenue has declined continuously, and the company needs to expand geographically. Su Erkai is deeply ploughed in the most economically developed areas of Jiangsu, Zhejiang and Shanghai, such as the Suzhou rail transit market, and six other Suzhou subway lines are being planned. Su er Kai provides a large number of high-quality products for Jiangsu, Zhejiang and Shanghai regional service city construction, industrial and mining enterprises, rail transit and other customers, and the company's acquisition will produce a strong regional complementary effect. for the company to enter and occupy the Jiangsu, Zhejiang and Shanghai market to provide a direct and effective path. The 13th five-year Plan will lay out the construction of power grid and increase the proportion of power grid investment. the expansion of the area covered by the company will help to obtain a larger market.
Performance forecast
Following the acquisition of CLP Xingfa in August to expand its business scope to public safety and counter-terrorism, and smart cities, Xinlong also acquired Su Erkai to prepare for war charging piles to enter the Jiangsu, Zhejiang and Shanghai markets. We expect the company's net profit for 2015-2017 to be 1.35 billion yuan and EPS 0.13 yuan, 0.21 yuan and 39.6 yuan, respectively, and the current share price is valued at 23.4 yuan, 37.8 and 39.6 yuan, with an overweight rating.