1. Xinhongtai resumed trading on September 7 and announced the acquisition of rail transit gate manufacturer Tianyi Shangjia. It is proposed to issue shares to all shareholders of Tianyi Shangjia at a price of 4.32 billion yuan and pay cash to purchase 100% of Tianyi Shangjia's total shares. Of the transaction price, 250 million yuan was paid in cash, and 4.70 billion yuan was paid by Xinhongtai by issuing shares to the counterparty. At the same time, the company plans to raise 785 million yuan of supporting capital from no more than ten specific investors through the inquiry method for cash payments and high-speed rail brake materials development and intelligent production lines. The company will achieve R&D, production and sales of key components of circuit breakers, low voltage circuit breakers and knife melting switches, and driving the dual main business of powder metallurgy brakes for EMUs and locomotive and urban rail vehicle gates and brake tile products, so as to achieve leaps and bounds diversified development.
2. The shareholding structure changed significantly before and after this acquisition, but the actual controller remained the same. After the transaction was completed (without taking into account the issuance of shares with the supporting capital raised), Zhao Hanxin, Zhao Minhai, Shen Hua, and Yu Xu held 20.00%, 6.93%, 3.05%, and 0.42% of the company's shares (total shareholding ratio was 30.40%), respectively. Zhao Hanxin was still the largest shareholder of the company, while Zhao Hanxin and Zhao Minhai were still the actual controllers of the listed company. Meanwhile, counterparties Wu Peifang, Jiutai Fanghe, and Shi Jiacai will hold 17.67%, 2.15%, and 0.17% of Xinhongtai's shares, respectively.
Zhao Hanxin, Zhao Minhai, and their co-actors, Shen Hua and Yu Xu, promised to extend the lockdown until 60 months from the end of this offering. There are no plans to reduce the company's shares during the lockdown period mentioned above. Other than this transaction, Wu Peifang and his co-actors have no plans to increase their holdings of the company within the next 60 months.
3. PE corresponding to the 2017 performance promise in consideration of this acquisition is 18.94X. The consideration for this acquisition was 4.32 billion yuan, while Tianyi Shangjia's promised performance for 2017-2019 was the audited net profit of no less than 228.147 million yuan, 262,814,500 yuan, and 30,3410.7 million yuan after deduction, respectively.
4. Compensation agreements where performance promises do not meet expectations are quite special: 1) If the sum of the net profit realized during the target company's performance commitment period is not less than 79,43722 million yuan, then the profit pledger is not required to compensate Xinhongtai; 2) the amount of compensation payable by all parties within the profit pledge party for the current period = (the cumulative amount of net profit promised by the end of the current period - the cumulative amount of net profit actually realized by the end of the current period) divided by 79,43722 million yuan × the total amount of compensation obtained by each party in the profit pledge party from this transaction; 3) the profit pledge party's current provisional compensation amount; 3 If it appears, it will take a while In the case of calculating the compensation amount, Wu Peifang will give priority to provisional compensation from the new Hongtai shares received in this exchange. If it is insufficient, provisional compensation will be made based on the cash consideration received, while parties other than Wu Peifang among the profit pledgers shall be provisionally compensated using the new Hongtai shares received in this transaction.
5. Tianyi Shangjia is a leader in localizing blades. The total size of the gate market is about 4-5 billion dollars per year. If calculated based on shipment volume, Tianyi Shangjia's shares in the high-speed rail gate market were 13.50% and 19.86% respectively in 2015 and 2016.
During the company's reporting period, Tianyi Shangjia sold a total of 414,500 powder metallurgy brakes for EMUs. The revenue from 2015 to January-April 2017 was 27,4637,600 yuan, 471,4985 million yuan, and 213.189 million yuan respectively, and net profit was 88.6662 million yuan, 19,696999 million yuan, and 99.052 million yuan respectively. Despite the continuous decline in the price of high-speed rail gates, the company's net interest rate remained at a very high level of more than 40%. It is expected that business performance will continue to grow steadily in the future.
Profit forecast and investment advice: Without considering acquisition preparation for the exam, the company's net profit for 2017-2019 is estimated to be 0.69, 0.73, and 77 million yuan respectively, and the corresponding PE is 73.9, 70.1, and 66.5 million yuan. If this acquisition is successfully completed, it is estimated that the company's net profit for 2017-2019 will be 297, 336, and 380 million yuan respectively. The share capital will be 289 million shares without considering raising supporting capital. The corresponding PE will be 33.61, 29.77, 26.32. The first time the purchase was covered and given a rating.
Risk warning: There is still a risk that this acquisition will pass, and the national rail transit planning and construction will not meet expectations