I. Overview of events

The company announced on July 29 that it intends to sign the "share subscription and shareholders Agreement" with India's Royale Marine IMP-EX Private Limited (hereinafter referred to as "the underlying company") and its 11 shareholders, and intends to use its own funds of US $4 million to subscribe for additional shares issued by the underlying company. After the completion of this investment, the company or its wholly-owned subsidiary will hold 25.30% of the shares of the underlying company, which is the second largest shareholder of the underlying company.

II. Analysis and judgment

Improve the global procurement and sales layout and strengthen the core competitiveness of global operations since 2016, the company has strengthened the global procurement and sales layout according to the fourth "five-year Strategic Development Plan" and relevant business plans, focusing on developing markets such as Southeast Asia and South America, and strengthening core operational capabilities. This acquisition is an integral part of the strategy. India is one of the emerging major shrimp producing countries, its raw material price, labor cost has a comparative advantage, and has great potential in industrial space, processing level and so on. The target company of this acquisition is located in the main producing area of Penaeus chinensis, which not only has standardized processing capacity and quality management system, but also has a customer base covering the United States, China, Europe and other countries. After the completion of the acquisition, it will give full play to the cost advantages of the target company and optimize the global layout of listed companies.

After the completion of the acquisition, the company will deeply participate in the management of the target company and have the right of veto. According to the agreement, after the completion of the acquisition, the company will appoint members of the board of directors according to the shareholding ratio and nominate not less than 2 directors; the company has the right to appoint core managers of key positions such as deputy general manager, deputy general manager of finance, deputy general manager of quality control, etc. The company and / or the directors appointed by the company shall have the right of veto over major decisions from the due date. The above agreement ensures the possibility that Guolian aquatic products will be deeply involved in the daily operation of the target company. On the one hand, it can ensure the realization of the interests of investors, on the other hand, it will help the target company to deeply integrate into the global operation network of listed companies.

The price of M & An is relatively reasonable. After the success of M & A, the operating income of 17Q2~18Q1 (fiscal year 17) / 18Q2~19Q1 (fiscal year 18) of the company is respectively US $4120 / 31.3 million, the net profit is US $240cm, the total assets are US $17.08max, and the net assets are US $8.5 million. The revenue / net profit of the target company in FY18 is lower than that in FY17, and the size of assets has increased. The company will subscribe for an additional 7.26 million shares of the underlying company at a price of US $4 million. Upon completion of the investment, it will hold 25.3% of the shares of the underlying company, with an average purchase price of US $0.55. According to the disclosed financial data, the PE of the past two years is 10.1 times, the PB is 1.9 times, and the valuation of the acquisition is reasonable. After the completion of this foreign investment, with the help of the successful operation experience of previous transnational acquisitions, the company is expected to take the target company as the starting point, optimize the overall management of the Indian supply chain, and increase supply support to wholly-owned subsidiaries in the United States. In addition, China's high-end aquatic consumer market is booming, and the target companies will also provide support for domestic consumer supply. In the long run, this merger will help to improve the fundamentals of the company.

Third, profit forecast and investment suggestions

It is estimated that in 19-21, the company's operating income will be 54.69 million yuan (65.65 million yuan), with a year-on-year increase of + 15% (20%), 17%, and a net profit of 1.12 percent (178 million yuan) attributed to the listed company, with a corresponding EPS of 0.14 yuan (0.23 percent) and a share price corresponding to PE of 30-19-12 (57%). It is optimistic about the growth brought about by the improvement of the global supply chain and the long-term improvement of operational efficiency after the completion of the acquisition. The company's current valuation is significantly better than the aquaculture industry-19 times the valuation level, covering for the first time, giving a "cautious recommendation" rating.

Fourth, wind insurance tips:

The acquisition of the new company failed, the industrial chain integration is more difficult than expected, food safety problems and so on.