Incidents:
On February 29, 2023, the company announced that it plans to acquire 78.34% of the shares of Garbo in cash to obtain absolute control, promoting the implementation of the “One, Two Wings” strategy. On the same day, the company announced the 2023 restricted stock incentive plan (draft). The total number of restricted shares to be granted under this incentive plan does not exceed 12.9 million shares, accounting for about 0.764% of the company's total share capital of 1.69 billion shares when the draft incentive plan was announced.
Comment:
The company signed the “Share Transfer Agreement Concerning Garbaoli Chemical Group Co., Ltd.”, agreeing to transfer 78.34% of the shares of Garbaoli, for a total of 4,074 billion yuan in cash. The original shareholders of Garbo made a performance commitment: net profit after tax for the fiscal year 2024/2024-2025/2024-2024-2024-2024 to 2026 shall not be less than RMB 4.13/8.75/1,394 million yuan, respectively. If the standard is not met, the original shareholders will pay performance compensation to Gabriel and the corresponding compensation amount will be directly deducted from the remaining share consideration payable in the current period. The share transfer price will be paid in three installments. The payment price for each instalment is 10%/60%/30% of the total share transfer price, respectively. Among them, the third share transfer price will be paid in three equal parts over three years after the handover is completed. The specific payment amount will be determined based on the results of Gabrielle's performance promises.
Acquire a leading paint company to achieve a “two wings flying hand in hand” business layout. After this acquisition, Garbaoli will become the company's holding subsidiary. The company's paint business production capacity will jump from the current 103,000 tons to more than 1.3 million tons. The production capacity layout will expand from North China to the whole country, and the paint sector business will be significantly strengthened. As of July 31, 2023, the shareholders' equity vested in the parent company under the consolidated caliber of Gabriel was 2,060 billion yuan, and the value-added value calculated by the earnings method was 3,960 billion yuan, with a value-added rate of 192.21%, and there is huge room for growth.
Equity incentives were introduced for the first time, demonstrating the company's confidence in development. The equity incentive plan will target no more than 347 people, and the grant price is 13.96 yuan per share. Among them, the performance conditions for lifting sales restrictions on restricted stocks granted for the first time are based on 2022 deducted non-net profit. The compound growth rate for 2024/2025/2026 should not be less than 27.7%/33.08%/25.43%, respectively, and higher than the target company's 75th quartile value or the same industry average. That is, it should reach 42.64 billion yuan/61.63 billion yuan respectively, an increase of 44.53%/5.02% year-on-year in 2025/2026. Without taking into account the impact of Gabrielle's consolidated statement (deducted based on 78.34% shareholding ratio), the company's net profit withheld from non-return mother in 2024-2026 was 39.4/58.0/ 6.07 billion yuan, respectively, with a compound annual growth rate of about 24.07%. The company has stabilized its leading position in the gypsum board industry. Through simultaneous optimization of product structure and price policies, and successive acquisitions of companies with advantages in waterproofing and coating, the company is expected to become a platform-based building materials enterprise that crosses the cycle.
Maintaining the company's “gain” rating, since Garbo has not yet consolidated the report and maintains the original performance forecast, the company is expected to achieve net profit of 36.68/46.08/5.401 billion yuan in 2023-2025, achieving an EPS of 2.17/2.73/3.20 yuan, corresponding to PE 11.43/9.10/7.76 times PE.
Risk warning: Overseas demand falls short of expectations, and valuations and profit forecasts fall short of expectations.