Overview of events
The company issued a pre-plan for the non-public offering of A-shares in 2020, with a total amount of no more than 2.118 billion yuan and a lock-up period of 6 months. the number of this issue shall not exceed 25 per cent of the total share capital before the issue, that is, 151 million shares, and the number of shares will not exceed 132 million shares calculated at 80 per cent of the current share price.
Analysis and judgment:
The purpose of this fund-raising is: (1) the comprehensive configuration center of aircraft training aircraft and simulators will be built at 837 million yuan, accounting for 40%, and 121aircraft and simulators for aviation training will be purchased, of which 108aircraft and 13 simulators of various types will be allocated to Xihua Airport, Fangzi Airport and Civil Rights Airport respectively. The construction period of the project is two years, with an average annual income of 455 million yuan and an average annual after-tax profit of 88.21 million yuan. (2) the construction of the second phase of the first phase of Chongqing Oriental Fashion driving training and Test Center is 378 million yuan, accounting for 18%, which is mainly used for the purchase of simulators and training vehicles. The construction of the whole project began in 2017, and the second phase of the project will be implemented, with a construction period of two years, with an average annual income of 160 million yuan and an average annual after-tax profit of 40.14 million yuan. (3) the upgrading and transformation of the intelligent driving training system is 162 million yuan, accounting for 8%. The construction period is 2 years, and the annual cost savings after reaching production are 46.4 million yuan; (4) Information construction is 111 million yuan, accounting for 5% (5) replenish liquidity and repay bank loans of 630 million yuan, accounting for 30%.
According to our analysis, the significance of this fund-raising lies in: (1) it helps to accelerate the entry into new navigation areas: the company currently has abundant orders on hand in aviation schools (nearly 170 million), especially during the epidemic period, the original orders for foreign training are transferred to China, but the current production capacity is limited. (2) help to speed up the entry into Chongqing driving training market, (3) maintain the leading trend of intelligent driving training, and improve the management information level of the company: we believe that the laying of VR equipment is expected to break the bottleneck of traditional driving school expansion and shorten the profit cycle; (4) help to reduce the company's debt.
Investment advice:
We believe that the demand for driving schools will only delay and will not disappear, and once the epidemic is over, the recovery flexibility is expected to be higher than that of other industries; future concerns: (1) in terms of the main business, Q3 has achieved regular enrollment in a single quarter, and will focus on reversing losses in remote schools next year; in addition, the company has also increased the construction of its marketing system during the epidemic to promote full-staff marketing. (2) VR is expected to bring cost reduction, and with the acceleration of VR equipment deployment, the expansion mode of light assets in different places is expected to be realized. At present, the single capacity utilization rate of the experience store that has been opened is higher. (3) Aviation school training, Shandong and Wuhan subsidiaries and testing stations are expected to become new growth points, and the performance will be more flexible next year. General Aviation, a subsidiary of the company, has signed a contract with Xiamen Airlines / China Southern Airlines Company with a total value of 2017.6 / 62.632 million yuan for 3 years, and General Aviation has received a notice of transaction of 86.548 million yuan from China Southern Airlines Company's estimated turnover, totaling nearly 170 million yuan. (4) at present, some areas have launched policies that require driving schools to have their own land, which is expected to accelerate industry integration. The company is the first driving school to resume full training and provide all tests after the epidemic. And in the future, the 70-year-old upper age limit for driving licenses for small cars, small automatic cars and mopeds will be cancelled, which is expected to expand the industry space, and the company as a leading enterprise is expected to fully benefit. Maintain the annual EPS0.17/0.34/0.39 of 20-21-22, consider the performance flexibility after the end of the epidemic, and maintain the "overweight" rating.
Risk hint
The risk of declining business performance caused by the epidemic; the risk of impairment of goodwill; the risk of pending litigation; systemic risk.
