Items:
On September 18, 2020, the company disclosed a plan to issue shares to specific targets. The target of this issue is not more than 35 specific objects that meet the regulations of the CSRC, and the total amount of funds raised does not exceed 1.3 billion yuan. After deducting the relevant issuance costs, the net funds raised are proposed to be used for the following two projects: 998 million yuan for the construction of chain motor vehicle testing stations and 302 million yuan for the acquisition of 70 per cent equity interest in Linyi Zhengzhi.
Guoxin Automobile View:
The company has a prominent position in the testing station equipment industry, while transforming operators to open up new growth space. In 2018, the company acquired a 70% stake in Xingqi Inspection and participated in the establishment of a Texas fund. The company's business extends from the supply of motor vehicle testing systems to the operation of motor vehicle testing services. In 2020, the company completed the acquisition of 70% of Linyi Zhengzhi's equity, and plans to jointly acquire 75% of China Inspection Group Automotive Inspection Co., Ltd., together with Linyi Fund and other related parties. In September this year, the company plans to set up a cooperative company with Hongyi testing, Tianyuan Environmental Protection and Jingtong Transportation Industry to integrate the operation of Jingzhou motor vehicle testing market. This time, the company plans to increase 1.3 billion yuan, of which 998 million yuan will be used for the construction of chain motor vehicle testing stations, and 302 million yuan will be used for the acquisition of 70% equity interest in Linyi Integrity, which will continue to realize the long-term logic of the company's transformation of testing stations. In addition, we believe that although the liberalization of the industry entry policy in the past 16 years has led to the relative reduction of barriers to entry, the core concern for the industry in the long run should be the speed of integration of testing stations by listed companies. and master the number of high-quality testing station resources.
We maintain the company's annual net profit of 2.6 million yuan, 361 million yuan, 485 million yuan, 37.8%, 38.8%, 34.5%, 2.50 yuan, 1.34, 1.86, 2.50 yuan, respectively, and maintain a reasonable valuation range of 65.10-74.40 yuan (PE is 35-40x for 21 years), and maintain the "overweight" rating.
Comments:
Co-ordinate the whole country: establish chain motor vehicle testing brand
The company intends to issue shares to specific targets of no more than 35 (including 35) the total amount of shares raised shall not exceed 1.3 billion yuan (including capital). Before the fund-raising is in place, the company will invest first through its own or self-raised funds according to the actual situation of the implementation progress of the investment project, and replace it in accordance with the procedures stipulated in the relevant laws and regulations after the fund-raising is in place. If the funds raised in this issue are less than the amount to be invested in the above-mentioned projects after deducting the issuance expenses, the insufficient part of the company will be solved by its own funds or other financing methods. After deducting the relevant issuance costs, the net funds raised are proposed to be used for the following two projects: 998 million yuan for the construction of chain motor vehicle testing stations and 302 million yuan for the acquisition of 70 per cent equity interest in Linyi Zhengzhi.
The construction of chain motor vehicle testing stations helps the company continue to extend to the downstream industrial chain. in addition to further laying out the construction of testing stations in key areas of the country, the company plans to build a testing station operation center to continuously realize the long-term logic of the transformation of the company's business to the operating end. The construction project of chain testing stations will help the company quickly establish a chain brand of motor vehicle testing services nationwide according to the characteristics of scattered operation in the testing service industry, solve the pain points of the current motor vehicle testing service industry, provide unified, standardized, standardized and transparent motor vehicle testing services for national motor vehicle testing service consumers, and become the leading professional organization of motor vehicle testing services in China. The testing station operation center will connect the information flow of each testing station design, testing, operation and maintenance, management and other links, so as to enhance the company's comprehensive management ability and decision-making ability, which will help to improve the company's management efficiency and reduce the cost of testing station management. and then improve the level of chain operation and management. After the completion of the testing station operation center, the company will enhance the company's data analysis and processing ability. through big data's analysis, the company will be able to excavate and more accurately grasp the needs of car owners and provide customers with richer and high-quality vehicle testing services. help to improve the service level of the company's testing station.
Acquire and integrate the testing business, gradually extend the operation link
Marching into Qingdao and extending the first step of operation On September 22, 2018, the company announced that safe car testing intends to use RMB 0 yuan to transfer 47.75 million shares (95.50% of the total shares, all of which are subscribed shares) held by Yu Zehua, a shareholder of Xingche Inspection, in 32.75 million shares of Xingche testing shares, including 65.50% of the equity of Xingche Inspection, and actually fulfill the payment obligation corresponding to 32.75 million yuan of subscribed capital with its own capital of RMB 32.75 million. It is proposed that 2.25 million shares (4.50% of the total shares of Xingche testing, paid-up shares) held by Li Peng, a shareholder of Xingche Inspection, will be transferred at RMB 2.25 million yuan. After the completion of the transfer, an Auto Inspection holds a total of 70% of the equity of Xingche Inspection, a total of 35 million Xingche testing shares. Car inspection has a certain popularity in Qingdao and its surrounding areas. through this transfer, car testing can quickly obtain the motor vehicle testing market and improve the business structure of car inspection. At the same time, it can obtain a certain market share of motor vehicle testing in Qingdao and its surrounding areas, and rapidly develop the motor vehicle market.
China Inspection is on its way to acquisition and is expected to land in the near future. On February 23, 2020, the company signed the "Asset purchase Agreement" and the "Supplementary Agreement" of the Asset purchase Agreement and the compensation Agreement with Zhaofang Investment and Hai Zhong Investment. It is agreed that the company will purchase a total of 75% of its shares in China Inspection vehicles from Zhaofang Investment and Hai Zhong Investment alone. Changed to safety car inspection, Linyi new kinetic energy, other parties (if any) jointly to Zhaofang investment, Hai Zhong investment to acquire a total of 75% of its stake in inspection cars. China Inspection Automobile has a certain brand effect throughout the country, which is cooperative with the company's business, which is conducive to the extension of the company's product application and customer distribution, but also conducive to improving the company's business structure and industrial layout.
Wield Linyi, introduce integrity and quality service; on July 11, 2020, the company announced that the transfer procedures for 70% of the equity of integrity in Linyi and the relevant industrial and commercial change registration have been completed. The company bought 70% of Linyi Zhengzhi in cash (including 70% of Zhengzhi Hedong, 70% of Zhengzhi Lanshan, 70% of upright used cars, and 70% of Integrity Insurance). The 70 per cent stake in Linyi Zhengzhi, the subject of the deal, is priced at 302.4 million yuan, with a profit of about 36.3348 million in 2019, corresponding to the acquisition of PE 11.88x. The quality of the integrity testing station is excellent, and the net interest rate of the testing business is more than 40%. At the same time, the service and management capabilities are significantly ahead of the peers. It is expected to export quality service and management concepts to the testing stations acquired by the company in the later stage. At the same time, related assets also include automobile insurance and second-hand cars. In the later stage, it is expected to take testing as the entrance and develop the relevant business in the post-market.
Jian Zhi Jingzhou, set up a cooperative company On September 3, 2020, the company announced that the company intends to invest abroad to set up a cooperative company with a registered capital of 25 million yuan, which will be funded and registered by an car testing in advance. the cooperative company acquires 100% equity in testing stations held by Hongyi Inspection, Tianyuan Environmental Protection and Jingtong Transportation Industry in the form of equity exchange and cash. Hongyi testing, Tianyuan Environmental Protection and Jingtong Transportation Industry received corresponding shares and cash of the cooperative company.
After the completion of the replacement, Anche Inspection holds 55% of the equity of the cooperative company; Hongyi Test holds 18% of the equity of the cooperative company; Tianyuan Environmental Protection holds 13.8% of the equity of the cooperative company; and Jingtong Transportation holds 13.2% of the equity of the cooperative company. This investment will carry out the integration of the vehicle testing market in Jingzhou, Hubei, optimize the testing stations and service outlets, introduce the industry-leading vehicle testing service mode, and actively promote the expansion of testing operations in Jingzhou and its surrounding areas. develop into a benchmark enterprise in the testing industry in Hubei.
Risk hint
First, it is significantly affected by the policy, and the release progress of some policies such as the upgrading of laws and regulations is lower than expected; second, the intensified competition in the testing station industry leads to a price war, thus dragging down the downstream gross profit margin; third, the acquisition progress of the testing station is not as expected, resulting in losses as a result of post-acquisition management.
Investment suggestion: the acquisition integration continues to be realized, and the testing station business steadily promotes the company's leading position in the testing station equipment industry, while transforming operators to open up new growth space. In 2018, the company acquired a 70% stake in Xingqi Inspection and participated in the establishment of a Texas fund. The company's business extends from the supply of motor vehicle testing systems to the operation of motor vehicle testing services. In 2020, the company completed the acquisition of 70% of Linyi Zhengzhi's equity, and plans to jointly acquire 75% of China Inspection Group Automotive Inspection Co., Ltd., together with Linyi Fund and other related parties. In September this year, the company plans to set up a cooperative company with Hongyi testing, Tianyuan Environmental Protection and Jingtong Transportation Industry to integrate the operation of Jingzhou motor vehicle testing market. This time, the company plans to increase 1.3 billion yuan, of which 998 million yuan will be used for the construction of chain motor vehicle testing stations, and 302 million yuan will be used for the acquisition of 70% equity interest in Linyi Integrity, which will continue to realize the long-term logic of the company's transformation of testing stations. In addition, we believe that although the liberalization of the industry entry policy in the past 16 years has led to the relative reduction of barriers to entry, the core concern for the industry in the long run should be the speed of integration of testing stations by listed companies. and master the number of high-quality testing station resources.
We maintain the company's annual net profit of 2.6 million yuan, 361 million yuan, 485 million yuan, 37.8%, 38.8%, 34.5%, 2.50 yuan, 1.34, 1.86, 2.50 yuan, respectively, and maintain a reasonable valuation range of 65.10-74.40 yuan (PE is 35-40x for 21 years), and maintain the "overweight" rating.
