Incident: 5/14, the company announced that the board of directors has reviewed and approved the “Plan for Issuing Shares to Purchase Assets and Raise Supporting Funds and Related Transactions” and will resume trading tomorrow (5/15).
The scope of the restructuring was extended to 100% shareholders of Minsheng Securities, with an issue price of 11.31 yuan/share, corresponding to 1.79 xPb. 1) According to the company's announcement, the scope of the restructuring was extended to 100% of Minsheng Securities's shares, and the merger progressed smoothly; 2) In terms of issuance price, the issuance price of this restructuring was the average stock trading price for 120 trading days before the pricing reference date (11.31 yuan/share), which is 8.1% higher than the current closing price, corresponding to the 1Q24 valuation of 1.79xPb; 3) As of the announcement date, the audit and evaluation of Minsheng Securities had not yet been completed, so the estimated valuation and transaction price of the underlying assets of the transaction were not yet determined. A shareholders' meeting was convened to consider matters related to this restructuring.
The restructuring is progressing smoothly, and trading will resume tomorrow. In the future, the main focus will be on determining consideration and the progress of regulatory approval.
1) Referring to similar historical interbank cases, the merger of Shenwan Hongyuan was suspended for the first time, and Fangzheng Securities's acquisition of Minzu Securities took 4 months. The company announced the plan and resumed trading within 10 trading days as scheduled; 2) The company will resume trading tomorrow (5/15), which will then require review of the plan by the board of directors and shareholders' meetings, approval by the Securities Regulatory Commission, etc., and the second suspension of trading when the Securities Regulatory Commission reviewed the merger, acquisition and restructuring matters. Referring to the historical case, it took about 1 year.
Comprehensive strength is expected to advance to the next level, and we look forward to the results of the merger. 1) The company simultaneously raised 2 billion yuan in supporting capital. Based on data from the end of 23, the net assets of Guolian Securities were 17.8 billion yuan/industry ranking 40 billion, and the net assets of Minsheng Securities were 15.8 billion yuan. Coupled with supporting capital, the net asset size after the merger will rank among the top 20 in the industry. 2) It is expected that comprehensive strength will be further strengthened on the basis of integration between the two parties. First, it will form synergy with Minsheng Securities' investment banking advantages and regional layout to enhance business competitiveness; second, it will absorb net capital and comprehensive strength after the merger and greatly enhance its net capital and comprehensive strength to prepare for long-term development.
Investment Analyst Opinion: Maintaining the “Highly Recommended” rating. The estimated net profit of the 2024-2026E company will be 610 million yuan, 890 million yuan, and 1.11 billion yuan respectively, the same as -9%, +45%, and +26% (without considering Minsheng Securities). The 5/14 closing price corresponds to the company's 24-26E dynamic PB 1.65x, 1.61x, 1.55x, respectively, and dynamic PE 49x, 33x, and 27x respectively.
Risk warning: Asset restructuring has fallen short of expectations; capital markets fluctuate greatly; there is uncertainty about the regulatory approval process