Incident: The company's shareholder Kirriff plans to transfer its 1.33 billion shares to Haier Group. If the transaction is completed, the company's controlling shareholder will be changed to Haier Group.

Haier Group took over, and business collaboration is beneficial to the company's long-term development. Haier Group is a collective ownership enterprise founded in Qingdao. Its development and growth is supported by Qingdao City and Shandong Province. Haier Group achieved revenue of 291.1 billion yuan in 2022. Haier Group's business spans the household, pharmaceutical and biological industries. Its listed companies include Haier Smart Home, Haier Biotech, and Yingkang Life. Haier Group's shareholding will help Shanghai Rice receive future support in terms of capital and supporting industrial resources. We are optimistic about the long-term development of the company after the shareholding change.

The share transfer price was 12.5 billion yuan, corresponding to a price of 9.4 yuan per share. According to the share transfer agreement, Kirriff will transfer 1.33 billion shares of its Shanghai Rice shares to Haier Group, accounting for 20% of the company's total share capital. The total consideration for the transfer was $12.5 billion, and the corresponding purchase price per share was $9.4, a 17.6% premium over the closing price on December 29, 2023. Kirriff currently holds 1.77 billion shares of the company. If the transfer is completed, it will hold 4.4 billion shares of the company, accounting for 6.58% of the company's share capital, and will maintain a seat on the board of directors. Both Haier Group and Kirriff promised not to sell shares in listed companies for the next three years. Kirriff is expected to maintain its status as an important shareholder of the company.

Shanghai Race has secured proxy rights for Kirifu Renbai for 20 years, and GDS performance promises to hedge against the performance risks of listed companies.

Killifford plans to amend the term of the existing albumin agency agreement to ten years and grant Shanghai Laishi the right to renew the agreement for another ten years. Furthermore, Kirriff promised that the cumulative EBITDA of GDS, a company participating in Shanghai Rice, will not be less than 850 million US dollars from 2024 to 2028. If performance promises are not fulfilled, Kirriff will pay cash compensation to listed companies. We believe that the relevant commitment highlights the excellent management capabilities of the Shanghai Laishi management team, mitigates the performance risks associated with GDS investment returns, and benefits the company's long-term value.

Profit forecast and investment advice: The company's revenue for 2023-2025 is estimated to be 7.58 billion yuan, 8.76 billion yuan and 10.16 billion yuan respectively, and net profit to mother is 2.17 billion yuan, 2.52 billion yuan and 2.93 billion yuan respectively. The company's self-operated blood products business has outstanding profitability. Acting importer Bai enhances its position in the industry and maintains a “buy” rating.

Risk warning: the risk that the amount of pulp collected will not meet expectations; the risk of increased competition in the industry; the risk of exchange rate fluctuations.