Event: Shanghai Luxin, a holding subsidiary of Shunhao, and Yunnan Hansu plan to jointly invest in setting up a new company to promote the coordinated development of the company's e-cigarette and industrial marijuana-related business.
Join hands with Yunnan Hansu to set up a joint venture company to develop electronic biological health products
According to the Cooperation Agreement signed between Shanghai Lvxin and Yunnan Hansu and Hanma Group, the parties will cooperate to explore the market opportunities of industrial hemp mosaic and leaf extraction basic materials in electronic biological health products, including thermal incombustible solids derived from industrial hemp mosaic base materials, liquid electronic atomization appliances and oral tablets, etc. Shanghai Lvxin and Yunnan Hansu plan to jointly invest to set up a new company, of which Shanghai Lvxin contributes 20 million yuan, accounting for 65% of the equity in the joint venture company. The new company will promote the coordinated development of Shunhao's e-cigarette and industrial marijuana-related businesses. In this cooperation, Yunnan Hansu is responsible for applying for and ensuring that the joint venture company obtains the license required for its establishment and legal operation in accordance with the law, and shall not compete with the joint venture company through measures such as heating the industrial hemp leaf base material and heating non-combustible solid electronic cigarette products, in order to realize the deep binding between Yunnan Hansu and the company in the development of electronic biological health products.
Industrial hemp has a wide range of uses, and Hanma Group is a domestic industrial hemp industry chain investment company.
As a variety of marijuana with tetrahydrocannabinol content less than 0.3%, industrial marijuana does not have drug use value, can be legally developed and used after approval, and is widely used in paper, textile, functional health food, medicine and other industries. Hanma Group is the only legal investment group in China based on the layout of the whole industrial chain of industrial hemp and in the direction of biopharmaceuticals. Yunnan Hansu Biotechnology Co., Ltd., a wholly-owned subsidiary of Hanma Group, has China's first hemp processing license that meets GMP standards, and it is also the largest extraction base for monomer cannabis diphenol (CBD) and other cannabis phenols in China.
We believe that the industrial hemp business license of Hanma and its subsidiary Yunnan Hansu is scarce, which is beneficial for Shunhao to maintain the industry leading edge in electronic biological health products through cooperation with it.
The layout of the company's e-cigarette business is leading, laying the foundation for future cooperation.
As early as 2013, the company set up Shanghai Luxin Electronic Technology Co., Ltd., a joint venture with Dongfeng Co., Ltd., engaged in the R & D and manufacture of e-cigarettes. In 2017, the company launched IQOS-compatible smoking sets to enter the Japanese market.
In November 2018, the company's Hong Kong Green New Harvest purchased Cambodian cigarette manufacturers to promote the development, production and sales of new non-burning tobacco products with heated content. We believe that the company's e-cigarette business started early, the technology is gradually mature, and the sales channels are wide. The company's experience in the field of e-cigarettes lays the foundation for future cooperation with Hanma Group and Yunnan Hansu, which is conducive to the future R & D and production of electronic biological health products, as well as the expansion of sales channels.
Profit forecast and investment suggestion
We estimate that in 2018-20, the revenue of the company will be 2.2952582 million yuan, the net profit will be 1.04 pound 1.32 billion, and the EPS will be 0.15, 0.19, 0.23 respectively. Consider the company's leading performance in the new tobacco, develop the electronic biological health business, and maintain the "overweight" rating.
Risk hint: the entry into force of the Cooperation Agreement depends on whether the joint venture company can obtain the approval of the public security anti-drug department on the research, production and sale of industrial cannabis electronic cigarette terminal products. Whether the joint venture company can obtain the approval documents approved by the public security department for the procurement of industrial hemp leaf base materials leads to a certain degree of uncertainty in its follow-up operation, and the specific implementation progress and effect are uncertain. Industrial marijuana should be strictly distinguished from intermediate marijuana and recreational marijuana / drugs, the risks of uncertainty and management should be regulated by national policies, and the legalization of recreational marijuana should be resolutely opposed.