Incidents:
Jiadian Co., Ltd. announced the “2024 Plan to Issue A Shares to Specific Targets”. According to the announcement, the company plans to issue A shares to Harbin Electric Group. The number is 101,788,101 shares, the issue price is 10.92 yuan/share, and the total amount of capital raised does not exceed RMB 1,111,526,063.28.
This issuance will increase the state-owned capital budget funds to share capital, and implement the transformation of state-owned capital budget funds into national rights and interests:
According to the company's announcement, from November 2021 to February 2024, Harbin Electric Group successively disbursed 6 state-owned capital operating budget funds to Jiadian Co., Ltd. and its subsidiaries (Jiadian Company and Harbin Electric Equipment), totaling 1,253 billion yuan.
According to the relevant documents of the State Council's State-owned Assets Administration Commission and the Ministry of Finance, state-owned assets budget funds ultimately need to be used by means of capital injections. In order to ensure that the state-owned budget funds should be put into use as soon as possible in order to take advantage of the financial benefits of the budget, the Harbin Electric Group uses the method of entrusting loans first and then taking the opportunity to inject capital, that is, the Harbin Electric Group issues entrustment loans to the company and holding subsidiaries through the Harbin Electric Group Finance Company, and promptly converts the state-owned budget funds into the company's equity investment when the company increases capital.
This issuance uses a fixed increase method to convert state-owned capital operating budget funds previously issued through entrustment loans into company shares. This release will help the company clarify and implement national rights and interests and meet the relevant regulations on state-owned capital budget funds.
Once the issuance is completed, the company's balance ratio and interest costs will be reduced:
The issuance converted the original entrustment loan into equity, which is conducive to reducing the balance ratio and interest costs of Jiadian Co., Ltd. As of March 31, 2024, the company's total assets were 9.431 billion yuan, total liabilities were 5.830 billion yuan, and the balance ratio was 61.82%. After the issuance is completed, according to the static forecast of asset and liability data as of March 31, 2024, the company's balance ratio will drop to 50.03%. Using the entrustment loan method before issuance, the company is required to regularly pay loan interest to the Harbin Electric Group. After the issuance is completed, the company will use the funds raised in this issuance to supplement the working capital of the loan entrusted to the Harbin Electric Group. According to the entrustment loan and interest rate estimates previously announced by the company, it is estimated that interest expenses will be reduced by about 40.295 million yuan per year.
Investment advice:
Considering that the company's main helium fan production line is about to be put into operation and delivery, and that the performance of our subsidiary Harbin Electric Equipment is growing rapidly, we have raised our profit forecast for the company. We expect the company's revenue from 2024 to 2026 to be 6.379/82.06/10.078 billion yuan, respectively, with growth rates of 19.9%/28.7%/22.8%, and net profit of 493/6.18/781 million yuan, respectively. Growth rates are 23.5%/25.2%/26.5%, respectively, with outstanding growth. Referring to comparable companies in the motor and nuclear power industry, the PE of comparable companies in 2024 was 20 times, the company was given 20 times PE in 2024, the target price for 6 months was 16.60 yuan, and the investment rating of buy-A was given.
Risk warning: Nuclear power project construction progress falls short of expectations; risk of fluctuations in raw material prices; risk of profit predictions and assumptions falling short of expectations.