The company plans to purchase 100% of Guangzhou Huineng's shares held by Guangdong Power Grid in cash. The target company is a leading enterprise in the field of electric power technology services in the Guangdong region. It has a synergy effect with the company's testing and testing business, which helps the company to continue to expand and strengthen its advantageous business and maintain a “highly recommended” rating.
Incident: In order to further expand the size of the company's testing and testing market, Southern Grid Technology plans to acquire 100% of its shares in Guangzhou Huineng from Guangdong Power Grid in cash. The transaction price is subject to the final signing of the agreement. The main business of the target company includes testing, testing and commissioning services, intelligent equipment manufacturing, etc.
This transaction will help the company to continue to expand and strengthen its advantageous business. The test, testing and commissioning service business is one of the company's five core businesses, and the market prospects are broad. Guangzhou Yueneng Electric Power Technology Development Co., Ltd., a subsidiary of Guangzhou Huineng, is a leading enterprise in the field of electric power technology services in the Guangdong region. It has a synergy effect with the company in testing and testing business. After the acquisition, it will help the company to further achieve specialized integration, strengthen, improve and expand its advantageous business, which is in line with the company's development strategy.
Mergers and acquisitions solved personnel bottlenecks, and the company's testing, testing and commissioning business grew rapidly. The company's testing and testing business relies on professionals, and merger and acquisition contract-type enterprises can effectively mitigate the problem of personnel restrictions; in 2023, the company successively integrated Guangxi Guineng and Guizhou Chuangxing to expand the cross-regional coverage of the testing and testing business. The overall revenue of Nanwang Technology's test, testing and commissioning business in 2023 was 582 million yuan, up 64.73% year on year. Among them, Guangxi Guineng contributed 95 million yuan in revenue in 2023, net profit of 0.13 million yuan, and 70% share acquisition price of 42 million yuan; Guizhou Chuangxing contributed 143 million yuan in revenue in 2023, net profit of 17 million yuan, and 100% equity acquisition price of 195 million yuan.
The target company's profitability is expected to increase. As of December 31, 2023, Guangzhou Huineng had total assets of 506 million yuan and net assets of 464 million yuan; in 2023, the company achieved revenue of 274 million yuan and net profit of 29 million yuan. Guangzhou Huineng's net interest rate in 2023 was 10.59%, slightly lower than the overall net profit level of 11.19% for Southern Network Technology in 2023. We believe that if mergers and acquisitions are completed, the company's competitiveness in testing and testing within the Guangdong region will improve, and the profitability of related businesses is expected to increase.
Maintain a “Highly Recommended” investment rating. We judge that in the next few years, the test and inspection business will face a boom cycle facing downstream thermal power customers, and the acquisition of Guangzhou Huineng is expected to bring a lot of room for growth in the company's test and testing business. The company's revenue for 2024 to 2026 is estimated to be 46.94, 64.78, and 8.745 billion yuan, respectively, and net profit to mother of 463, 6.35, and 872 million yuan, corresponding PE is 35.8, 26.1, and 19.0 times, respectively, maintaining a “highly recommended” investment rating.
Risk warning: risk of transaction failure, risk of energy storage business expansion falling short of expectations, risk of inventory price decline.