Event: ① signed a "Framework Agreement on Equity transfer and Capital increase and share expansion" with Yunnan Chengbang Fuji on the acquisition of 52.9412% equity in Yunnan Huayun Jinxin, the subject of industrial marijuana. ② signed a "strategic cooperation agreement" with Heilongjiang Academy of Sciences to jointly promote the development of functional food, medicine, bio-organic fertilizer and other high-value products of Heilongjiang characteristic crops (hemp, black garlic, brown rice, etc.).
Two-pronged approach: plan to acquire industrial marijuana planting and processing targets in Yunnan and cooperate with Heilongjiang Academy of Sciences Yunnan Huayun Jinxin Biotechnology Co., Ltd. is 100% owned by Yunnan Chengbang Fuji, its business scope includes industrial marijuana cultivation and processing, biotechnology promotion services, cosmetics manufacturing and domestic trade agents. It has obtained "Yunnan Industrial Hemp planting license" (Eryuan County) and "Yunnan Industrial Hemp processing license". The company intends to hold 52.9412% equity of Yunnan Huayun Jinxin with RMB 90 million by way of acquisition and capital increase. At the same time, the company signed a "strategic cooperation agreement" with the Heilongjiang Academy of Sciences to jointly set up a 1000-50 million yuan hospital-enterprise strategic cooperation project fund during the cooperation period. the aim is to formulate corresponding enterprise standards and professional training for its industrial hemp variety test, extraction and product deep processing development, including planting technology, processing extraction, application development and so on. Yunnan and Heilongjiang are the only legal provinces of industrial marijuana in China, and the company is expected to occupy the advantages of planting and processing industrial marijuana in both places.
Industrial marijuana is not a drug, and the domestic management of industrial marijuana is strict.
As a variety of hemp with tetrahydrocannabinol content less than 0.3%, industrial hemp does not have drug utilization value, and its fiber, seed and stem have high economic utilization value, and can be legally planted and industrially developed and utilized after approval. It is widely used in paper, textile, building materials, industrial oil, functional health food, cosmetics, medicine and other industries. In China, the management of industrial marijuana is strict, and the number of companies with relevant qualifications is relatively small. According to the regulations of Yunnan Province on license for planting and processing of Industrial marijuana, industrial marijuana planting license and industrial marijuana processing license are required to engage in industrial marijuana related business, and the public security organs at or above the county level shall be responsible for the examination, approval, issuance, supervision and administration of industrial marijuana planting license and industrial marijuana processing license.
The layout of industrial hemp is in line with the layout strategy of the company's single characteristic crop industry chain.
The company is the leader of pesticide preparation industry in China. Since 2017, it has focused on the business model of characteristic crop industry chain and regarded a crop as an industry. It has innovated and established a new industrial park development model of "company + government + farmers (cooperatives) + partners". It has successively laid out the industrial chain of high-value characteristic crops, such as dragon fruit, golden pineapple, golden passion fruit, sunshine rose grape, macadamia nut and so on. As a characteristic cash crop, industrial hemp has a wide range of uses, which meets the needs of the development of the company's industrial chain.
Investment advice and profit Forecast
It is estimated that the return net profit of the company from 2018 to 2020 is 3.3cm 4.1pm 535 million yuan and EPS 0.36max 0.45max 0.58 yuan respectively. The company is the leader of pesticide preparations, the strengthening of industry regulation, the company's market share is expected to increase significantly, industrial marijuana business development to achieve the company's single characteristic crop industry chain relayout, maintain the "buy" rating.
Risk hints: there is uncertainty in whether the two cooperation will be reached; there are risks of regulatory and regulatory changes in the industrial cannabis business, changes in the market and macro-environment, and the company's own operating uncertainty; the signing of the "framework agreement" does not have a significant impact on the company's 2019 operating results; industrial cannabis should be strictly distinguished from intermediate marijuana and recreational marijuana / drugs, and firmly oppose the legalization of recreational marijuana.
