Items:

The company recently announced that it intends to sell a 100% stake in Holmes to Pepsi Beverage through a cash sale, with a negotiated enterprise value of $705 million. Combined with the company's previous performance KuaiBao, specific comments are as follows:

Comments:

After a hundred years of regret to break up, Pepsi intends to integrate. Since the company bought Baicaowei for 960 million in 2016, Baicaowei has an asset of 2.532 billion yuan in 2019, with an income of 5.023 billion yuan and a net profit of 171 million yuan, an increase of 155.4%, 297.4% and 1147.5%, respectively, compared with the end of 2015. The price of this transaction corresponds to 29 times of PE and 1 times of PS in 2019. After the transaction, it is estimated that the revenue of the listed company in 2019 will be 82.3% lower than before, resulting in an investment income of 3.59 billion yuan and an one-time net profit of 2.67 billion yuan.

I miss you and Baicaowei strive to achieve collaborative integration during the three years, but the commercial genetic differences, in-depth promotion is very difficult, this breakup can be understood. Pepsi Beverage hopes to make a contribution in the field of snack food in recent years. Baicaowei has tens of millions of direct users is its core competitiveness, which is in line with Pepsi's development strategy.

The company was obviously undervalued in the early stage, and the transaction led to a preliminary return of value. Due to the fact that your post-acquisition fusion performance failed to meet capital market expectations, the company's early share price continued to fall, and the company's market capitalization of more than $4 billion was significantly undervalued compared to Baicaowei's revenue of 5 billion in 2019 and its growing prospects. Coupled with the good thinking about your original sound business and fixed assets, we have always believed that if the company has the right reform, it can achieve a substantial revaluation. This sale is also an option for reform. After repaying all the debts, the listed company still has 3.5 billion yuan in cash on its account, and retains a relatively stable 1 billion jujube business income as well as a large number of factories, office buildings, land and other assets near Zhengzhou Airport. The theoretical valuation should not be lower than the current market value. From an industrial point of view, it is still a bit regrettable that the company has failed to restructure its management structure, achieve the image of Baicaowei as the main body of the listing, and achieve a substantial revaluation.

With a lot of money in hand, we expect listed companies to do a good job in their main business and actively look for new opportunities. The company has also made some learning progress in the process of integration with Baicaowei, and its own e-commerce has developed rapidly. The new layout of nuts, freeze-dried and other health products accounted for 35.2% of the company's revenue in 2019, offsetting the decline in the original offline stores. The vitality of jujube business is still alive, and the company adjusts its positioning to focus on high-end health food business, which we think meets the company's own ability conditions. The company has a lot of money and believes that it will actively seek good M & An opportunities in the future, but we suggest that the company should still examine it carefully so as not to consume cash depreciation valuation at will. It is suggested that the company should actively increase the share dividend, increase the return of shareholders, and improve the confidence and support of shareholders and employees.

Maintain the target price of 11.3 yuan from the perspective of industrial value. After the sale of assets, the company has no liability cash as high as 3.5 billion, coupled with the long-term stability of jujube business at around 1 billion, a slight improvement in operation can achieve a certain profit, in addition, the company has a large number of assets, we believe that from the perspective of the value of industrial mergers and acquisitions, it can be valued at 50-6 billion, and whether it can continue to rise in the future depends on how the company uses cash and how to improve its operations. As the restructuring has not yet been determined, we will not adjust our profit forecast for the time being to maintain the 2019-2021 EPS forecast value of 0.33 yuan 0.41 soybean 0.47 yuan, maintain the company's target price of 11.3 yuan, and maintain the "recommended" rating.

Risk hint: the risk of transaction failure; the growth of the business in this part is not as expected.