Event: on October 21, 2019, the company issued the preliminary Plan for absorbing and merging Huainan Mining (Group) Co., Ltd. and issuing shares to purchase assets and related transactions. Listed companies absorb and merge Huainan Mining by issuing shares and paying cash to all shareholders of Huainan Mining. After the completion of the absorption and merger, all shareholders of Huainan Mining will become shareholders of listed companies.
Comment
Huainan Mining Group mainly injects core coal and power assets: according to the bond prospectus of Huainan Mining Group, Huainan Mining Group has a total coal production capacity of 7030 million tons / year, of which 6 million tons / year (Dingji Coal Mine) has been injected into the listing platform. there are 4 pairs of mines with a total capacity of 1420 million tons / year, so it is expected that this plan will inject coal production capacity of about 5010 million tons / year. The group has a total installed power capacity of 13.8751 million kilowatts, of which Xinzhuangzi Power Plant, Pansan Power Plant, Guqiao Power Plant and Tianji Power Plant Phase I and Phase II have been injected into listed companies, involving a production capacity of 2.5122 million kilowatts, and the remaining 1136.29 kilowatts will be merged into listed companies. According to the above carding, after the completion of the merger, listed companies are expected to expand coal production capacity by 8.35 times and power production capacity by 4.52 times.
After absorbing and merging the assets of Huainan Mining Group, it will run through the integration of coal, electricity and transportation: in addition to coal and electricity business, the listed companies also have 272.5 kilometers of railways with a total transport capacity of 70 million tons and the largest coal export terminal along the Yangtze River (Yuxikou Coal Terminal). After the completion of the acquisition, the company will become a company integrating coal production, coal sales, power generation, electricity sales, railway transport and port transshipment, effectively smoothing the risk of periodic fluctuations in coal prices.
After the merger, both corporate profits and EPS are expected to increase: 1) profits: according to the announcement, in the first three quarters of 2019, the combined net profit of the subject matter of the merger is 3.437 billion yuan, and the annualized net profit is expected to be 4.583 billion yuan, while the annualized net profit of listed companies is expected to be 880 million yuan. After the completion of the absorption and merger, the net profit in 2019 is expected to increase to 5.463 billion yuan. 2) in terms of EPS:
We assume that the evaluation value is equal to the net assets, then the total net assets of the bid assets as of September 30 is 38.994 billion yuan. Based on the announcement issue price of 2.53 yuan per share, 15.413 billion shares will be issued. Taking into account the original share capital and cancelled share capital, the final share capital is expected to be 17.099 billion shares, then the corresponding EPS is 0.32 yuan per share, while the EPS before suspension is only 0.17 yuan per share. EPS is also thickened significantly.
Before the suspension of trading, the stock price is 2.83 yuan, and the calculated PE is 8.84 times according to the estimated EPS, which is basically in line with the industry average.
Investment suggestion: without considering the background of asset injection for the time being, we expect the company's net profit from 2019 to 2021 to be 808 million yuan, 937 million yuan and 984 million yuan respectively, corresponding to an EPS of 0.21 trillion 0.24 pound 0.25. For the first time, the investment rating given to increase holdings-An is 3.20 yuan, equivalent to 16 times P / E.
Risk hint: transaction approval is not approved, transaction is suspended, evaluation price is too low, coal price falls sharply, macro-economy goes down.
