occurrences
The company announced that it intends to issue shares to the Commerce and Trade Group to purchase 85% of the shares in metallurgical materials and 85% of Hangzhou Steel International Trade's shares; pay cash to buy the remaining 15% of the shares of metallurgical materials and 14.5% of Hangzhou Steel International Trade's shares; issue shares to Dongling Co., Ltd. to buy 100% of Dongling Trading's shares; and pay Fuchun Company cash to purchase operating assets and liabilities in its subsidiary business sector. The total price of the underlying assets is 3.115 billion yuan; 402 million shares with an issue price of 5.61 yuan/share, in addition, the cash payment amount is 861 million yuan.
Management analysis
The evaluation work has been completed, and it is proposed to achieve the listing of the Group's core assets in the metals and raw fuel materials trading sector as a whole.
This is the smooth progress of the company's acquisition in mid-2019. The relevant underlying assets are mainly engaged in commodity trade business. Metallurgical materials, Hanggang Steel International Trade, Dongling Co., Ltd., and Fuchun Company's net profits in 2019 were 114 million yuan, 155 million yuan, and 28 million yuan respectively. The overall profit of trade assets was relatively stable. If the transaction is completed in 2020, the profit forecast for the above assets for 2020 to 2022 is 483 million yuan, 503 million yuan, and 519 million yuan. The valuation level is 6-7 times PE. Overall, it is expected to increase certain performance and form an industrial chain extension, supplement and improvement with the existing steel business.
Follow the progress of cooperation with Tmall. The company indicated in an earlier change announcement that it signed a cooperation framework agreement with Zhejiang Tmall in Hangzhou for the joint construction of the Zhejiang Cloud Computing Data Center project. Details such as the scale and amount of land for the Hanggang Banshan base to be selected for the project, specific partners, process arrangements, allocation plans, and exit mechanisms have yet to be determined. The above means that the company's IDC business market development is progressing smoothly, and the steel mill IDC model has been further verified.
The first phase of the company's IDC is expected to be put into operation in the second half of the year. Currently, the company's cloud computing data center has a total of 9,670 cabinets, and the first phase of 4,000 cabinets is expected to be completed and put into operation by the second half of the year. The company's competitive advantages in participating in IDC are obvious: 1) Land location and land reserve advantages. Land resources are scarce in Hangzhou. After the Banshan base was shut down, the group's own plot covered an area of 1,743 acres, reserving 400,000 square meters of vacant plant; 2) Energy supply advantage. There is an existing substation that can supply independent power to the data center, and there is also a natural gas master station. 3) Policies and customer advantages. As a state-owned enterprise, the company has obvious advantages in building a “government cloud”.
Profit Forecast & Investment Advice
The company is expected to achieve net profit of 928 million yuan, 1,040 million yuan, and 1,142 million yuan in 20-22, corresponding to PE 31 times, 28 times, and 25 times, respectively. Maintain a “buy” rating.
Risk warning
The progress of the increase was lower than expected, and the steel business's profit failure to meet expectations dragged down short-term performance.